In the latest volley in a longstanding dispute over the financial health of Connecticut hospitals, state budget director Benjamin Barnes on Monday questioned Bristol Hospital’s plans to build a new medical office building and recruit staff, noting that hospital supporters had recently warned that state funding was needed to avoid compromising the community’s health and access to care.
In a letter to hospital President and CEO Kurt Barwis that was copied to legislative leaders and e-mailed to reporters, Barnes asked for assurances that, “your earlier pleas for those dollars were based on the full fiscal reality that your organization was facing and not just part of a public relations campaign to obtain more taxpayer funded expansions of your hospital.”
And, Barnes wrote, “The obvious conclusion is that Bristol Hospital is using state government money in the form of Medicaid supplemental payments to finance construction of new facility expansions.”
Bristol Hospital responded Monday night with a statement calling Barnes’ letter inaccurate and said it “presents unfounded allegations and innuendo about the connection between state Medicaid funding and the project,” which it said would be fully funded by a private developer.
And Barwis said that hospitals are actually in effect subsidizing the state’s Medicaid program, since it pays them less than the cost of care. State figures show Medicaid paid Bristol Hospital 71 cents for every dollar of cost during the 2014 fiscal year.
Barwis added that, while the building project won’t be funded with Medicaid payments, its progress was in question because the state has paid the hospital only about $800,000 of nearly $5.2 million in Medicaid supplemental funding it is supposed to receive under the current state budget. That threatened to cause a cash-flow problem as the hospital paid for the due-diligence work involved in planning the building project, which is intended to bring together primary care and specialist physician offices currently scattered throughout Bristol, he said.
“In order to keep providing services, if [the state doesn’t] make these payments, we’re going to have to reallocate any of the initial costs that will ultimately be taken care of by the developer into subsidizing the state Medicaid program,” Barwis said.
Barnes’ letter came one month after he announced that the state was suspending approximately $140 million in state and federal funding for hospitals in response to a growing budget deficit, and follows years of contention between Gov. Dannel P. Malloy’s administration and health care executives over the financial health of hospitals and the adequacy of state payments they receive.
The funding suspension, which prompted an outcry from legislators and hospital officials, appears to have been resolved, at least for now. The money, known as Medicaid supplemental payments, is meant to repay a portion of the $566.1 million hospitals are expected to pay in state taxes this fiscal year and fund a pool of money for small, independent hospitals, including Bristol. Legislators last week passed a plan to address the deficit that did not rely on withholding the hospital supplemental payments, and a spokesman for the governor’s budget office said the money would be released.
But the tension between the Malloy administration and hospitals continues.
Hospital officials have argued the administration has been relying too heavily on hospitals to address state fiscal challenges, including by imposing a hospital tax in 2012 that now nets the state more than $400 million. (By taxing hospitals and redistributing the money to the industry, the state can generate federal matching funds. In its first year, the state returned $50 million more than it collected from hospitals to the industry. But since then, the amount hospitals receive back has dropped. This year, they are expected to pay $566.1 million and receive $164 million back.)
Malloy administration officials note that hospitals now receive more than $2 billion in payments from Medicaid and the state employee and retiree health plans, far more than a decade ago. They say hospitals have benefited from the federal health law, since it reduced the number of people without health insurance. And they cite high earnings by hospital systems and executive pay among hospital leaders, suggesting that hospital officials who raise concerns about funding want state taxpayers to subsidize excessive salaries.
Hospital officials say the focus on executive pay is a red herring. They say the increased state payments to hospitals has been the result of delivering more care to people with Medicaid – a program that has grown substantially since the health law passed in 2010 and paid an average of 63 cents for each dollar of hospital costs in 2014, according to state figures.
In recent months, the Connecticut Hospital Association has run ads blunt in their description of the governor’s policies toward hospitals.
“Malloy’s risking your care with his years of drastic taxes and cuts,” the narrator said in a recent ad, which urged viewers to tell the governor to stop cutting hospitals, because “lives depend on it.”
Hospitals have also filed scores of administrative appeals challenging Medicaid rates, which Barnes has described as a precursor to legal action. A Department of Social Services hearing officer recently rejected most of the state’s requests to dismiss the appeals.
And hospitals have urged supporters to write to legislators and the Malloy administration to stop cuts to hospital funding.
In his letter to Barwis Monday, Barnes noted that he had received “hundreds of identical e-mails” from “Bristol Hospital partisans” saying that state funding cuts could compromise the health of the community and access to care.
“President Barwis, I have led organizations through financial difficulties. I am doing so now, preparing plans to curtail services, lay off staff, and renegotiate pension and benefit agreements,” Barnes wrote. “I had assumed from the dire tone of the e-mails, the television ads, and your frequent public statements, that Bristol Hospital would be going through the same gut-wrenching process. Instead, I learn you are hiring, building and expanding with taxpayer money while the state of Connecticut is making difficult choices about cutting services and laying off state employees.”
Barnes also questioned the need for another outpatient facility in the area.
“It is hard to imagine a region better equipped with medical facilities than Hartford’s western suburbs, with hospitals and outpatient facilities in Bristol, Farmington, New Britain, and Waterbury, not to mention Hartford’s three hospitals,” Barnes wrote.
Barwis said those statements don’t accurately characterize the situation. He noted that the hospital had laid off workers last year and withheld raises.
The recruitment efforts are meant to fill open positions created through turnover when staff were hired by competitors, he said, not new positions.
And the building project is not an expansion but an effort to consolidate multiple physician offices into one location to replace facilities that are antiquated and make it difficult to recruit physicians who can meet the community’s needs, Barwis said.
Hospital officials have said the building project reflects concerns about access to care that community members cited during a recent needs assessment.
Bristol Hospital’s margin was 0.96 percent during the 2015 fiscal year, according to data from audited financial statements released by the state Office of Health Care Access. The hospital took in $1.3 million more than it spent. The margin for its parent company, Bristol Hospital & Healthcare Group, was slightly lower – 0.63 percent.