After significantly cutting hospital funding and making bold comments about hospital profits and hospital executive pay, Gov. Dannel P. Malloy’s budget office announced Friday that it would distribute $14.1 million to six small hospitals.
Malloy’s budget office said there are “massive differences between large hospitals and small ones in profit margins.”
The six hospitals set to receive payments are Bristol, Day Kimball, Griffin, Charlotte Hungerford, Johnson, and Milford. This money is available because Malloy’s budget office is reprioritizing a portion of the remaining quarter of Medicaid supplemental payments — that is, from that portion of the supplemental pool that was not rescinded.
The Malloy administration is still going forward with its decision to reduce the Medicaid supplemental and small hospital pool payments by $63.5 million, which represents a $192 million reduction in funding because the cut also means the loss of federal matching grants.
“We know that hospitals are not one-size-fits all, and that’s why we’re proactively reprioritizing and reallocating dollars to support small hospitals that need support most,” Office of Policy and Management Secretary Ben Barnes said in a statement. “To be clear, hospital systems are seeing extraordinary revenues, but today we’re working to reprioritize and reallocate payments so we can assist the small hospitals and support patient care.”
But the decision didn’t satisfy lawmakers on either side of the aisle.
Senate President Martin Looney, D-New Haven, said he appreciates that the governor listened to Democratic lawmakers and took “a first step in reversing these ill-conceived and devastating cuts to our community hospitals.”
However, he said “the restorations cannot end here. These cuts will have a multiplier effect — jeopardizing federal reimbursements — adding to my concerns about the financial viability of the smaller, community-based hospitals.”
House Speaker Brendan Sharkey echoed his remarks.
“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,” Sharkey said. “Democrats will soon be recommending serious alternatives for the governor to consider, and it’s time for minority Republicans, who voted against the state budget but are now also opposing the governor’s cuts, to step up to the plate with some real ideas.”
Malloy, who has been beating back bipartisan criticism of the mid-year hospital cuts, repeated his previous statements on Thursday that hospital profits were in excess of $916.4 million in 2014.
“There’s no doubt that the hospitals had a great run when they took an additional billion in state funds over a very short period of time,” Malloy said Thursday. “But we can’t afford to do that any longer.”
He said making a “supplemental payment to people who made $916 million last year or to use the majority leader’s number of a half billion, doesn’t make sense when you’ve got to find savings.”
Senate Minority Leader Len Fasano doesn’t believe the hospitals made $916 million last year. He said when his staff does the math it ends up being $35 million. He said that’s because the pre-tax profits were amounted to $591 million. The hospitals were then taxed $556 million, which means their entire profit will be reduced to $35 million, Fasano said. He said most of that money will be eaten up by infrastructure and technology improvements that are mandated by the Affordable Care Act.
He said the governor needs to stop referring to the payments to hospitals as “subsidies.”
“These are not subsidies or grants hospitals receive to help maintain their business. Rather these funds help pay for services that hospitals provide to the Medicaid population,” Fasano said.
House Minority Leader Themis Klarides said “this token action does nothing to restore critical Medicaid funding for services to the poor.”
Klarides said they still need a special session to fix the budget.
Jennifer Jackson, CEO of the Connecticut Hospital Association, said Malloy’s decision to restore less than six percent of his cuts to hospitals “is simply a political smokescreen to cover up and divert attention from the devastating $190 million in cuts he unveiled two weeks ago. Let’s be clear: This is a Band-Aid on a bone-deep wound.”