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Hospitals urge overhaul of governor's hospital-tax plan, warn of Medicaid shortfalls
Summary
Hospital leaders and the Connecticut Hospital Association urged the Finance, Revenue and Bonding Committee to reject the governor's proposed changes to the hospital-provider tax in SB84 and instead adopt a multi-year plan aimed at maximizing federal matching funds and protecting safety-net hospitals. They warned the current proposal would shift costs and leave hospitals more financially vulnerable.
Hospital executives urged Connecticut lawmakers on Tuesday to rethink the governor's proposed restructuring of the hospital-provider tax, saying the draft would make hospitals'already precarious finances worse and do little to secure the federal approvals needed to preserve access to care.
The Connecticut Hospital Association recommended a different approach to the tax in SB84: work with the state to craft a multi-year plan that maximizes federal matching dollars, uses increased tax proceeds to support patient care, and ensures participating hospitals receive proportional supplemental payments.
"This fiscal year, hospitals will pay $820 million in taxes," Paul Kidwell, CHA's senior official on the issue, told lawmakers. "Under the governor's proposal, the tax will increase by $100 million to $920 million." Kidwell and other witnesses said the governor's draft would add an estimated $53 million to state coffers while returning about $40 million to hospitals — including $15 million earmarked for the Waterbury hospital acquisition.
Hospital spokespeople said the state's Medicaid underpayment problem is the central driver of hospitals'financial strain. Chris O'Conor, chief executive of Yale New Haven Health, said his system reported a Medicaid shortfall of roughly $430 million and that Connecticut Children's has faced an underpayment that threatens specialized services. "Connecticut Children's is the only independent children's hospital in the nation that does not participate in its own state's hospital tax," O'Conor said, urging a steady long-term solution.
Speakers warned that an ill-timed tax change could complicate the state's ability to win federal approvals under new federal rules. "We think a one-year deal would make us vulnerable to changes at the federal level," Paul Kidwell said, asking lawmakers to pursue a five-year arrangement with the Centers for Medicare & Medicaid Services.
Hospital backers urged lawmakers to avoid policies that would remove some hospitals from taxation while allowing them to receive supplemental payments. Several witnesses argued that the draft policy as written would create winners and losers among hospitals, and urged negotiations to ensure any increase primarily leverages federal matching dollars to support patient care.
The committee did not take a vote during the hearing; senators and representatives pressed hospital leaders on details including how the tax distribution would be calculated, how a federal waiver would be negotiated, and whether safety-net hospitals would be protected. Hospital representatives said they remain willing to work with the administration and the legislature to develop a proposal they say could preserve federal match and reduce the magnitude of uncompensated care for the state's hospitals.
What's next: Hospital leaders urged the administration to move quickly to negotiate a multi-year approach with CMS so hospitals and the state know what will happen when existing settlements expire on June 30. The industry warned that delays or poorly designed changes would add to financial pressure on hospitals and could imperil specialized services in parts of the state.
