Hospitals could face larger cut

MidState Medical Center in Meriden

Gov. Dannel P. Malloy cut $192 million in Medicaid funding for hospitals last month, but the actual hit to hospitals could end up being 25 percent higher.

The state is holding back additional payments to hospitals that weren’t part of the cut, and a spokesman for the governor’s budget office said decisions about whether to pay them will be “based on whether we have enough money to keep the budget in balance.”

Citing stock market volatility and lower-than-expected income tax receipts, the Malloy administration last month rescinded nearly $103 million in state spending. That included certain payments to hospitals for the second, third and fourth quarters of this fiscal year. Because Medicaid spending generates federal matching funds, the cut to hospitals amounted to $192 million.

Malloy did not cut first-quarter payments to hospitals, but they have not yet been distributed. The first quarter ended Wednesday. Hospital officials said that in previous years, the first-quarter payments were made in August.

Asked whether the payments would be made, Gian-Carl Casa, undersecretary for legislative affairs in the state Office of Policy and Management, said the budget office would consult with the governor, legislators, Department of Social Services and others “to determine the best approach,” which he said would be based on whether there was enough money to keep the budget balanced.

The funding at issue includes two pools of money. One, referred to as the Medicaid supplemental pool, gives back to hospitals money the industry pays the state in taxes, a process that allows the state to collect federal matching funds. This fiscal year, hospitals are slated to pay $556.1 million in taxes, up from $349.1 million last year. The state budget that passed in June called for them to receive $241.1 million back in supplemental payments. But Malloy’s cut to three-quarters of those payments will leave hospitals with an expected $60.3 million – if the first-quarter payment is made.

The other funding affected by the cut is an $11.1 million pool of money – $3.6 million in state funds, the rest covered by federal matching funds – intended for small, independent hospitals, which was slated to go to Bristol, Day Kimball, Griffin, Charlotte Hungerford, Johnson Memorial and Milford hospitals.

Legislators have criticized the cut to hospitals, as well as additional cuts the governor made to mental health and addiction treatment services and programs for people with developmental disabilities.

House Speaker J. Brendan Sharkey, D-Hamden, and Majority Leader Joe Aresimowicz, D-Berlin, issued a joint statement Friday calling on Malloy to release the first quarter payments immediately.

“This is an obligation of the state, and it is not an option to not pay our bills for services our hospitals have already provided,” the leaders wrote. “Having already cut future commitments to hospitals, the administration’s holding back these funds makes a bad situation worse. Legislative Democrats are developing a package of alternative cuts that address potential budget shortfalls, and we await similar suggestions from our Republican colleagues. In the meantime, we urge the governor to not exacerbate the problems his cuts have already created for our hospitals.”

“We have made clear publicly and privately for over a month that we have been open to their alternative ideas,” Malloy spokesman Devon Puglia said. “We look look forward to eventually seeing them, because we continue to wait for them.”

Hospital officials have warned that Malloy’s cuts could lead to layoffs and service reductions. Bristol Hospital President and CEO Kurt Barwis said this week that if nothing changes, the hospital would default on its bonds in 12 to 18 months. Earlier this year, the hospital eliminated 43 positions, reducing its workforce by 5 percent in response to Medicare and Medicaid cuts.

Other hospitals have laid off employees and attributed the job cuts fully or in part to fiscal pressures from the state budget, not including Malloy’s September cut.

Stamford Hospital last month announced that it was laying off 20 employees, leaving 113 open positions unfilled, closing its mobile wellness center, consolidating community outreach and education programs, and would, in 2017, discontinue its annual subsidy to primary care clinics. Hospital officials said the changes were made to offset an increase in hospital tax payments, but had not taken Malloy’s most recent cut into account.

In June, Hartford HealthCare announced plans to eliminate 335 positions, affecting 418 workers, and the Yale New Haven Health System announced plans to close two clinics.

The Malloy administration has pointed to hospital financial performance to suggest the industry remains highly profitable, noting that hospital corporate systems, which include parent companies and subsidiaries, took in $916.4 million more than they spent during the 2014 fiscal year.

The governor can cut up to 5 percent from most budget line items without legislative approval. Because nearly all of the state’s Medicaid spending is included in one $2.45 billion line, Malloy has the ability to unilaterally cut up to $123.4 million from the program. (Total Medicaid spending is close to $6 billion, but the state doesn’t budget some of the funding that gets reimbursed by the federal government.)