The administration of Gov. Dannel P. Malloy is making a strategic concession in the bitter political fight over hospital funding cuts by restoring $14.1 million to a half-dozen of the state’s smaller hospitals.
The administration is shifting funds originally budgeted for the larger hospital groups to six small independent hospitals: Bristol, Day Kimball, Griffin, Charlotte Hungerford, Johnson Memorial and Milford.
The policy change allows the administration to retain the savings identified last month while blunting criticism that it was threatening the fiscal health of some of the state’s most vulnerable hospitals.
“This is simply a political smoke screen to cover up and divert attention from the devastating $190 million in cuts he unveiled two weeks ago,” said Jennifer Jackson, the chief executive of the Connecticut Hospital Association. “Let’s be clear: This is a Band-Aid on a bone-deep wound.”
The move is intended to shift the debate away from the impact of the cuts on smaller hospitals back to more comfortable terrain for the administration: the ability of larger hospital groups like Yale New Haven Health System and Hartford HealthCare to absorb cuts.
“We know that hospitals are not one-size-fits all, and that’s why we’re proactively re-prioritizing and reallocating dollars to support small hospitals that need support most,” said Benjamin Barnes, the governor’s top budget official. “To be clear, hospital systems are seeing extraordinary revenues, but today we’re working to re-prioritize and reallocate payments so we can assist the small hospitals and support patient care.”
The administration’s announcement came with laudatory quotes from legislators representing districts with small hospitals and one from Mayor Anita Dugatto of Derby: “Griffin Hospital is not only Derby’s largest employer, it is a driver of economic activity for the greater [Naugatuck] Valley area.”
“We are grateful that Gov. Malloy recognizes the unique role that small community hospitals play in our state,” said Sen. Mae Flexer, D-Killingly, in a statement provided by the governor. Her district includes Putnam, home of Day Kimball, whose failed merger talks with Hartford HealthCare was blamed on Malloy’s cuts.
But the concession did not end criticism of cuts that legislators of both parties say was ill-considered, if only because it also would cost the hospitals a loss of federal matching funds.
“The restorations cannot end here,” said Senate President Pro Tem Martin Looney, D-New Haven. “These cuts will have a multiplier effect—jeopardizing federal reimbursements—adding to my concerns about the financial viability of the smaller, community-based hospitals.”
Last month, Malloy used his limited executive authority to order $103 million in cuts from the current budget, saying the move was prudent in the face of flagging tax receipts and a weakening stock market.
Nearly $64 million of those cuts were to come in Medicaid payments for hospitals, which would cause the loss of $128 million in federal funds for a total reduction of more than $190 million.
Those cuts, including the loss of federal funds, to the smaller hospitals were: Milford, $1 million; Johnson Memorial, $1.7 million; Griffin, $3.6 million; Day Kimball, $4.2 million; Charlotte Hungerford, $4.4 million; and Bristol, $5.9 million.
The $14.1 million in restored funds includes $9.4 million in federal and $4.7 million in state money. The distribution: Milford, $736,870; Johnson Memorial, $2.3 million; Griffin, $3.3 million; Day Kimball, $2.8 million; Charlotte Hungerford, $2 million; and Bristol, $2.9 million.
The administration had made cuts to two types of hospital Medicaid funding: quarterly supplemental payments that go to nearly every hospital, plus a separate pool for the six small hospitals. Both forms of funding generate federal matching funds.
The supplemental payments are intended to return to hospitals money they pay the state in taxes. By taxing hospitals and returning money to the industry, the state can collect federal matching funds. This fiscal year, hospitals are slated to pay $556.1 million in taxes, up from $349.1 million last fiscal year.
The adopted state budget called for hospitals to receive $241.1 million back in supplemental payments, but Malloy’s cut eliminated three-quarters of those payments. The remaining money was due during the first quarter of this fiscal year, which ended Sept. 30, but has not yet been paid.
The administration said Friday the additional money for the small hospitals will be reallocated from a portion of those unpaid first-quarter supplemental payments.
House Speaker J. Brendan Sharkey, D-Hamden, said he was pleased to see the governor act. “However, simply reshuffling already overdue payments for the first quarter toward smaller hospitals is not an adequate resolution and amounts to randomly picking winners and losers,” he said.
Republican leaders said Malloy’s action Friday solved nothing.
“This isn’t a responsible budget plan. What about the funds the governor cut for the disabled?” said Senate Minority Leader Len Fasano, R-North Haven. “This isn’t a thoughtful health care policy. It’s a press release dump just before a long holiday weekend.”
House Minority Leader Themis Klarides, R-Derby, said the governor had taken only “token action.”
“We still need a special session of the legislature to be convened immediately to fix this mess,” she said.
Malloy has justified the cuts by asserting that hospitals, with exceptions, are making signficant profits.
His Office of Policy and Management has said Connecticut hospitals made $664.9 million more than they spent last fiscal year. Hospital corporate systems, which include parent companies and subsidiaries, took in $916.4 million more than they spent last fiscal year.
The Connecticut Hospital Association and Fasano have said the latter figure is misleading because it includes $179 million earned by UConn’s John Dempsey Hospital, which is not subject to the tax or eligible for supplemental payments, and includes nearly $300 million from Western Connecticut Health Network’s acquisition of Norwalk Hospital, a one-time asset transfer.
On Thursday, Day Kimball announced plans to eliminate 23 fulltime-equivalent positions, about 2 percent of its workforce, and freeze wages. The hospital in Putnam had been in talks to join Hartford HealthCare, the parent company of Hartford Hospital and four other hospitals, but the two sides suspended talks this week, citing Malloy’s cuts.
Johnson Memorial is in the process of seeking state approval to be acquired by St. Francis Hospital and Medical Center, with which it is currently affiliated.
Arielle Levin Becker contributed to this story.