The report found that the present reimbursement formula was inflationary, inordinately complex and provided "inappropriate incentives" to physicians.

It also included $13 million to pay for the changes the Legislature would later make in the reimbursement formula.

They also suggest waiting until the state issues new reimbursement formulas for health services next year to get a better sense of the hospitals' market value.

The state passed legislation in 1983 to establish a new, presumably fairer reimbursement formula for the agencies.

Hospital officials in part blame the reimbursement formulas, including Medicaid and Blue Cross, for not keeping pace with their costs.

Included in this year's budget is $13 million for a new reimbursement formula that will cover the last quarter of the state's fiscal year.

The state can direct that money where it wants by making technical adjustments in the reimbursement formula.

Only a small portion now goes to the city under the reimbursement formula in effect.

He said that state officials finally agreed about five years ago to start taking regional cost differences into account when calculating reimbursement formulas for school construction costs.

The reimbursement formula has a geographic index based on the cost of providing services in the area.