New hospital tax formula makes new winners and losers

A new method for calculating the proposed tax on hospitals, part of the budget agreed to by Gov. Dannel P. Malloy and Democratic legislators, changes the projected financial outcomes for hospitals.

Yale-New Haven Hospital would gain $27.2 million under the plan. Greenwich Hospital remains the biggest projected loser, although its loss–$7.3 million–would be less than under the old formula.

The plan calls for taxing hospitals and redistributing the money based the proportion of Medicaid and uncompensated care each hospital delivers. By doing so, the state can capture federal matching funds.

The net effect of the latest formula–developed in response to concerns that the previous formula might not meet federal requirements–is about the same as the previous version. The state would gain $149 million. Hospitals would pay $349.4 million and get back $400.1 million.

But the effect on individual hospitals has changed considerably. Danbury Hospital was projected to lose money but will now gain; eight others that had been expected to gain will now lose money.

Other hospitals gaining money include Backus, Bridgeport, Hartford, The Hospital of Central Connecticut, Charlotte Hungerford, Lawrence & Memorial, Milford, Norwalk, St. Francis, St. Mary’s, St. Vincent’s, and Stamford.

Those losing money include Bristol, Day-Kimball, Griffin, Johnson Memorial, Manchester Memorial, Middlesex, MidState, New Milford, Rockville General, St. Raphael, Sharon, Waterbury and Windham. UConn’s John Dempsey Hospital and Connecticut Children’s Medical Center are exempt from the tax.

The Connecticut Hospital Association says more hospitals would end up losers because the budget also calls for cutting nearly $83.3 million in aid that helps cover the cost of caring for uninsured and underinsured patients. Counting that cut, only eight hospitals come out ahead, according to the hospital association–Backus, Charlotte Hungerford, Lawrence & Memorial, Milford, Norwalk, St. Vincent’s, Stamford and Yale-New Haven.

“We’re very concerned about the impact of the tax,” said Kim Hostetler, the association’s vice president for administration and communication.

Hostetler said hospitals understand the need to structure the tax to meet federal requirements, but she noted that half of the state’s hospitals now lose money under it. The association has urged lawmakers to consider steps to help hospitals, including sunsetting the tax and providing a pool of money to reduce the losses the hardest-hit hospitals face.

The Malloy administration has countered that hospitals have benefitted from additional state reimbursement from a Medicaid program for low-income adults, although hospitals say they still lose money caring for those patients. Budget director Ben Barnes has said he did not find the hospitals’ proposals compelling.