Hartford Hospital Arielle Levin Becker / CTMirror.org

Hartford HealthCare and the parent company of Day Kimball Hospital say they have suspended plans to consider an affiliation because of “severe and unexpected” cuts in Medicaid payments, a reference to $192 million in funding reductions Gov. Dannel P. Malloy made to hospitals last month.

“Given the magnitude of the state’s cuts, it would be imprudent for us to consider moving forward with such a partnership at this time,” James Blazar, Hartford HealthCare’s senior vice president and chief strategy transformation officer, said in a statement Monday. “This reckless slashing of Medicaid funding makes it difficult for HHC to create a path forward with Day Kimball Healthcare right now. Both our organizations have just taken a gut punch.”

Day Kimball President and CEO Robert Smanik said the Putnam hospital will now need to figure out how to address the challenges it faces as an independent organization, rather than as part of a larger network. In addition to exploring a formal affiliation, Hartford HealthCare and Day Kimball had plans to enter management service agreements that would allow Day Kimball to gain economies of scale for certain services, but spokesman Laura Dunn said the management service agreements were now suspended as well.

“There are 90,000 individuals in Northeast Connecticut who are really dependent on us as their provider, and we need to revamp and refocus to ensure that we continue to be able to address their needs given the financial pressures we’re facing,” Smanik said.

Smanik said the hospital is now working on cuts to adjust to the reduced funding, which he said include Medicaid rate reductions, an increase in state taxes and the most recent cuts Malloy issued last month.

The Malloy administration pushed back, pointing to Hartford HealthCare’s financial performance during the past five years.

“This is a tactic from hospital executives,” Gian-Carl Casa, a spokesman for the governor’s budget office, said. “Hartford Healthcare is a non-profit system that made $850 million in profits in just the last few years. This means their highly compensated executives are telling Connecticut taxpayers to supplement and subsidize the hospital corporation’s high salaries and extraordinarily positive revenue margins. Hartford Healthcare is doing more than fine, and it’s wrong for them to ask taxpayers to foot the bill.”

As part of the governor’s cut, made in response to stock market volatility and lower-than-expected income tax receipts, Day Kimball is expected to lose $4.2 million in state and federal funding this fiscal year, while Hartford HealthCare – which includes Backus, Hartford and Windham hospitals, The Hospital of Central Connecticut and MidState Medical Center – is expected to lose $41.7 million. The actual size of those cuts could be higher, however, because in addition to Malloy’s cut, the state has withheld payments that were due to hospitals during the first quarter of this fiscal year, which ended last week.

The cut comes from two pools of funding. One, the Medicaid supplemental pool, returns to hospitals a portion of the money the industry pays the state in taxes, a process that allows Connecticut to collect federal matching funds. This year’s budget counts on hospitals paying $556.1 million in taxes, up from $349.1 million last year. Hospitals were initially supposed to receive $241.1 million back in supplemental payments, but Malloy’s cut last month eliminated three-quarters of those payments, leaving hospitals with an expected $60.3 million. That money was due to hospitals during the quarter that ended last week. A spokesman for Malloy’s budget office said decisions about whether to make the first-quarter payment would be “based on whether we have enough money to keep the budget in balance.”

The other funding Malloy cut is $11.1 million in state and federal funds for small, independent hospitals, including Day Kimball.

Hospital officials and some legislators have blasted Malloy’s cut. Some hospital officials have said they will likely lead to service and job cuts.

“This is what we have been saying would happen when Governor Malloy slashed $200 million from hospitals – his actions will hurt everyone in our state,” the Connecticut Hospital Association said in a statement Monday. “We see that manifest now, and we expect it to continue. Hospitals across the state have and will continue to work hard to preserve access to care in their communities, but these cuts undermine what people count on their hospitals to deliver. This is a crisis situation. We urge legislators to intervene and stop these cuts today.”

Malloy has responded to questions about the hospital cuts by 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 Malloy administration has also noted that state spending on hospitals has increased dramatically in recent years – from $1 billion in the 2009 fiscal year to more than $1.7 billion last fiscal year. But hospital officials note that the bulk of those payments cover care delivered to patients covered by Medicaid, and point out that the program’s enrollment has doubled since 2010. Hospital officials also say it’s important to note that since 2012, the industry has paid nearly $350 million per year in taxes, and will pay more this year.

Arielle Levin Becker covered health care for The Connecticut Mirror. She previously worked for The Hartford Courant, most recently as its health reporter, and has also covered small towns, courts and education in Connecticut and New Jersey. She was a finalist in 2009 for the prestigious Livingston Award for Young Journalists, a recipient of a Knight Science Journalism Fellowship and the third-place winner in 2013 for an in-depth piece on caregivers from the National Association of Health Journalists. She is a 2004 graduate of Yale University.

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