Hospitals 'must deal' with new state tax
Updated 6:44 pm, Wednesday, June 22, 2011
The state's new formula for hospital taxes and compensation -- which at first would have cut funding for Danbury and New Milford hospitals by
$7 million -- will mean only a $1.4 million reduction.
"It's not as bad as we thought it would be," said Steven Rosenberg, the chief financial officer of the Western Connecticut Health Network, the umbrella organization that manages the alliance of the two hospitals.
"But it's still a $1.4 million hit to the system," he said. "We'll have to deal with it."
If the numbers are broken down further, New Milford Hospital will come out ahead by $387,742 in the new state formula.
In comparison, Danbury Hospital will see its revenue drop by about $1.8 million.
Mr. Rosenberg said because the two hospitals now have one operating budget, the new taxes show up as a $1.4 million loss to Western Connecticut Health Network.
He added that, as further details of the state budget passed by the General Assembly are worked out, hospitals may see even more strain to their budgets by having to pay for costs and services the state used to cover.
"We're hearing about increased co-pays for Medicaid, cuts in funding for dental care for Medicaid, cuts in funding for Medicaid patients using ambulances," Mr. Rosenberg said.
"We still haven't seen all the details in the budget," he said.
Gov. Dannel P. Malloy added the tax on hospital revenue this year as a way to bring money to state government and reduce its $3.4 billion deficit.
Stephen Frayne, the senior vice president of health policy for the Connecticut Hospital Association, said that at the same time as adding the tax, the Malloy administration had been planning to eliminate the state's reimbursement to hospitals for uncompensated care -- the money hospitals lose for treating Medicaid patients, patients in state assisted-living programs and people who never pay their medical bills.
The net loss to hospitals in the state, from both new taxes and loss of the uncompensated care reimbursement, would have been $84 million, Mr. Frayne said.
That would have meant a $7 million cut to Western Connecticut Health Network.
The network is already anticipating cuts to Medicare funding under President Barack Obama's health care reform legislation.
It hopes to reduce its spending by $10 million a year for the next five years to manage that reduction.
"We could be seeing a double whammy," Mr. Rosenberg said.
In March, Dr. John Murphy, the network's president and chief executive officer, said an additional $7 million to $9 million loss of revenue through cuts and new taxes would "shred the safety net" and hurt health care throughout the area.
In turn, community supporters and legislators in the General Assembly went to work to lessen the cuts in the state budget. That campaign succeeded in getting some of the uncompensated care money restored.
"We would have lost $84 million, but now it's $32 million," Mr. Frayne said.
"We're very grateful to our friends, to people who volunteered to help us, and to our legislators," said Andrea Rynn, spokeswoman for the network.
In New Milford Hospital's case, the new formula for taxes and funding actually ended up helping. It is among Connecticut facilities classified as "distressed hospitals" in the new formula, Mr. Frayne said.
In 2009, New Milford Hospital ran a $1.5 million deficit. As a result, Mr. Frayne said, the hospital will pay a new 5.5 percent tax on its inpatient revenue, but it is exempt from the new 3.5 percent tax on its outpatient revenue.
Danbury Hospital, which had a $17.9 million surplus in its 2010 fiscal year, will have to pay taxes on both its inpatient and outpatient revenue.
Ms. Rynn said hospitals still don't know how much other aspects of the new state budget would end up costing them.
She added society inevitably pays for health services. Either hospitals bear the cost or patients forgo care, get sicker and need even more care down the line.
"It has to be paid for," Ms. Rynn said.