As debate over the Affordable Care Act subsides following the failure of the latest repeal efforts, New York is now facing federal funding cuts to hospitals that could require the state to revisit its roughly $150 billion financial plan.

Cuts took effect Sunday to the Medicaid Disproportionate Share Hospital payment program, which helps hospitals cover the cost of care for the uninsured or underinsured. The DSH cuts, payments of which were supposed to be reduced as more people became insured through the Affordable Care Act, will cost the state $1.1 billion in the next 18 months and $2.6 billion when it's fully phased in, Gov. Andrew Cuomo said Tuesday. The funding gap won't be shored up by the state due to a looming $4 billion budget deficit.

“There's a slight unknown in all of this. Some members of the congressional delegation believe the cuts will be restored by Dec. 31. That would be great and we should all pray for that. If we know the cuts will not be restored by Dec. 31, I'm considering calling a special session to bring the legislature back, because they would have to change the law on the distribution of the DSH funds, as the DSH amount has changed. If the law is still in effect on Dec. 31, we'll pass a new distribution formula in the state budget,” Cuomo said.

Bea Grause, the head of the Healthcare Association of New York State—an organization that represents 550 nonprofit and public hospitals, nursing homes and home care agencies—told the New York Law Journal on Wednesday that the organization is focusing on trying to get Congress to pass a bill to delay the DSH payment cuts, which were initially slated to start in 2014, but were delayed until Oct. 1, 2017.

Hospitals throughout the state will likely not be affected by the funding cut until January, Grause said, giving the trade group time to negotiate and lobby Congress to extend the DSH payment program and retroactively grant hospitals payment. Grause, who had previously been of counsel at Foley Hoag, where she'd worked on regulatory and legislative strategies for health care clients, said hospital “members large and small are very nervous on what could happen if the cut does come to pass.”

While the hospital association's focus for the time being is on the federal government, the Cuomo administration has retained New York-based tax, audit and advisory firm KPMG to advise the state on how to distribute the hospital funding cuts. So far, nearly $1 billion of DSH payments have been made to voluntary hospitals, as required by the law. The remaining money for the state's five public health systems—NYC Health + Hospitals, Erie County Medical Center, Westchester Medical Center, Nassau University Medical Center and SUNY Downstate Medical Center—is being set aside until KPMG completes its review. KPMG declined to comment for this story.

At a news conference Tuesday, Cuomo said, “All hospitals will need to find savings and local governments and state government will need to find ways to work with these hospitals to make ends meet because if this stays in place, again—we won't get to 100 percent funding.”

Outgoing NYC Health + Hospitals CEO Stan Brezenoff sent a letter accusing the Cuomo administration of withholding $380 million in DSH payments, putting the already financially strained public hospital system on shakier grounds, Politico reported.

The DSH payment cuts may also trigger a recently enacted provision that gives the administration broad latitude to make changes to the state's fiscal plan. The state budget agreed to in April allows the state Division of Budget to come up with a contingency plan to address federal funding cuts if it amounts to more than $850 million. The state Legislature then has the ability to accept the contingency plan or reject it and return to Albany to come up with their own plan within 90 days.

Contact the reporter Josefa Velasquez at [email protected]; Twitter: @J__Velasquez.