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Committee debates Arkansas Surgical Hospital exemption from provider tax; proposal fails after extended questioning
Summary
A bill that would have exempted Arkansas Surgical Hospital from the state’s hospital provider tax program provoked extended committee discussion about CMS waiver risk and potential effects on rural hospitals; the committee ultimately did not advance the measure.
Representative Acre presented House Bill 1530, which would have changed the definition of “specialty hospital” under the hospital provider tax program to exempt Arkansas Surgical Hospital, an orthopedic and spine specialty facility, from the provider tax and associated supplemental payment calculations. Brian Fowler, chief executive officer of Arkansas Surgical Hospital, said the hospital had been offered an exemption when the program began and that the facility had paid into the tax for 15 years while seeking a safe exit now that program calculations and the tax cap have changed. Fowler said the hospital serves patients from every county in the state and pays nearly $2,000,000 in various state-related taxes.
Elizabeth Pittman, director of the Division of Medical Services at the Arkansas Department of Human Services (DHS), answered multiple technical questions about CMS processes. Pittman said DHS intends to pursue an automatic exemption under federal guidance (the P1/P2 test) if the state can demonstrate the statutory test is met and confirmed DHS had run numbers indicating they could submit for an automatic approval. She cautioned that she had not previously sought an automatic exemption with CMS and that the process would require DHS submission of P1/P2 waiver information.
Committee members repeatedly asked whether removing the hospital from the assessment would shift costs to other hospitals or jeopardize the supplemental payment program. Jody Entritt, executive vice president of the Arkansas Hospital Association, urged members to weigh risk and reward and warned that CMS’s approval of similar exemptions in other states had been followed by increased federal scrutiny of assessment programs. Entritt told the committee the hospital’s $1 million assessment (tax) would be absorbed by remaining hospitals if the exemption were granted and stressed that even small increases could be consequential for struggling rural hospitals.
Representative Acre and his supporters said DHS had confirmed the automatic-exemption test could be met and that precedent existed in other states. After extended questioning and a roll-call vote, the committee did not advance the bill; the chair announced the sponsor’s bills had failed at that point in the meeting.
Why it matters: Supporters framed the bill as correcting an original program design choice and creating a “safe exit” for a hospital they say never fit the original program. Opponents — primarily hospital association representatives and several members of the committee — warned that federal review could imperil the assessment/supplemental payment program and lead to funding shortfalls for other hospitals, including rural providers.
Outcome: Sponsor requested a favorable motion; after public testimony and a roll-call, committee action did not pass the measure.
