AUGUSTA – In a scene reminiscent of last spring, yet another budget battle is taking place between Gov. John Baldacci and Maine hospitals.

Hours of meetings by both sides Monday – the first in months – failed to find agreement over Baldacci’s plan to trim payments to hospitals.

“They’re still looking at a cut or tax. Neither one makes any sense to us,” said James Cassidy, president of St. Mary’s Regional Medical Center in Lewiston and chairman of the board for the Maine Hospital Association.

“At best, they’re being obstinate. At worse they’re being too political,” said Baldacci spokesman Lee Umphrey, after hospitals declined a new administration proposal.

Hospitals may now decide to do what they did last year: lobby legislators, health-care workers and citizens on the effects of the proposed cuts. On Monday Sen. Neria Douglass, D-Auburn, said she’s already heard from several hospital workers worried about losing their jobs.

To make the budget balance, Baldacci is insisting he has to cut MaineCare rates to hospitals. The cut could mean hospitals lose nearly $28 million between now and June 30 in state and federal matching money.

The administration justifies the cut saying Maine hospitals are more expensive than medical centers in other states, that they are a $3.6 billion industry in Maine and that they get a lot of business from taxpayer-supported health programs, so they should help solve the state’s red ink problem.

The administration also points out that in the following two years, hospitals will receive nearly $53 million more in a variety of ways.

Hospital representatives respond that the cut is on top of others made last year, and that it could mean laying off workers or eliminating money-losing services such as rural health care.

Hospital spokesmen said money should instead come from the new Dirigo health plan, a program starting July 1 to provide affordable health insurance to small businesses and individuals.

The governor said that’s not an option because it would unravel the state’s plan to provide affordable health insurance.

“Hospitals will have no choice but to pass on this price increase” as well as “potential layoffs and program elimination,” Mary Mayhew, spokeswoman for the MHA, said Monday.

Last year hospitals took a $58 million cut in state and federal money. “That was a ‘sharing- the-pain'” and “let’s-be-cooperative” effort with the new administration, Cassidy said.

That cut was painful for hospitals statewide, he said. “We worked very hard to reduce our costs. There were all kinds of things we were not able to do. We postponed projects and really cut to the bone. … Our concern is we’re just being whittled away, and each year there’s less and less resource for direct patient-care staffing.”

Taking another cut on top of last year’s “would be absolutely devastating,” he said.

Trish Riley, director of the Governor’s Office of Health Policy and Finance, said the administration recognizes that hospitals have been making efforts to cut costs, “but the reality is they’re part of the budget crunch. We want them to be part of the solution.”

Hospitals are getting more money over the next two-year budget from three sources: $20 million to $24 million from additional federal Medicare money; elimination of an annual $3.5 million hospital tax; and with the state providing insurance to sick people who used to be uninsured, “over the biennium hospitals will make at least $129 million” by not having to provide charity care. “So they still gain about $53 million in revenue even with the cuts,” Riley said.

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