More on Capital Finance

Connecticut hospitals fight budget cuts, property tax proposals

Governor floats an increase in the state hospital tax, Medicaid funding cuts, limits on hospital tax credits and new property taxes.

Photo of Yale-New Haven Health from <a href="">Wikipedia</a>.Photo of Yale-New Haven Health from Wikipedia.

Hospitals in Connecticut are waging a campaign against a number of state budget and tax proposals that could leave them with lower revenue, and maybe inspire such cost-saving measures in other states.

Facing a $170 million budget shortfall, Connecticut Governor Dannel Malloy and other lawmakers are floating a raft of ideas to save money, including an increase in the state hospital tax, Medicaid funding cuts, limits on hospital tax credits, and a new way for municipalities to tax hospital property.

Malloy’s proposed budget would leave the state’s 34 hospitals with a $750 million drop in state funding over the next two years, a large chunk of it from a $216 million reduction in uncompensated care payouts, according to Connecticut Hospital Association. The proposed increase of the state hospital tax, from $350 to $510, would bring in another $110 million in federal monies via the state-federal financing matching.

[Also: These states had the most Obamacare grants]

But the Connecticut Hospital Association claims the state has been gradually shifting that added federal money away from hospitals. The hospitals are on track to pay $350 million this year, and get only $96 million back.

Malloy is proposing eliminating that supplemental payment going forward, despite Medicaid demand for hospital care exceeding reimbursement trends, the CHA said. “In 2015, 2016, and 2017, the state will pay less for the hospital services it uses than it did in 2008, even though enrollment in Medicaid in 2015, 2016, and 2017 will be 68 percent higher than it was in 2008.”

Then there is a bill legislators are sponsoring to go along with the budget — “An Act Concerning The Preservation Of Municipal Tax Bases” — allowing towns and cities to tax nonprofit colleges and hospitals. It would make Connecticut the only state in the nation where local governments can levy property taxes on nonprofit hospitals and higher education institutions. Maine’s Gov. Paul LePage has proposed a similar idea.

Follow Healthcare Finance on Twitter and LinkedIn.

“Not only would the measure fly in the face of 200 years of history, but it would make costs go up and negatively affect all Connecticut residents,” the hospital association said. “Connecticut hospitals epitomize the reason that the property tax exemption was created.”

Jennifer Jackson, CEO of Connecticut Hospital Association, is calling on legislators to rethink the proposals. “Proposed funding cuts and taxes in Hartford, including the imposition of a property tax levied on not-for-profit hospitals, will threaten hospitals’ ability to maintain community benefits at current levels and would affect access and services for all patients.”

[Also: Which states earned the most Medicare bonuses?]

In 2013, Connecticut hospitals spent $1.5 billion -- 15 percent of their total revenue -- in community benefits, with $1.2 billion coming from unpaid government-sponsored healthcare, $217 million from uncompensated care and $57 million tied to local health initiatives, according to CHA.

The shortfall is also affecting jobs. Yale-New Haven Health, the state’s largest hospital network, said it has already frozen hiring for non-patient care jobs.

“If the State budget is passed as proposed, Yale New Haven Health System would be impacted by more than $100 million in additional taxes and funding cuts to Medicaid,” the organization said in an online outreach page asking patients and community members to contact to their legislators. “Today, the State reimburses our system which takes care of more Medicaid patients than any other provider, about 58 cents on the dollar of cost which means we actually lose 42 cents on the dollar for every Medicaid patient we serve.”

Twitter: @AnthonyBrino