Courtesy of CTByTheNumbers
Yale New Haven Hospital (Courtesy of CTByTheNumbers)

HARTFORD, CT—The Connecticut Hospital Association panned Gov. Dannel P. Malloy’s budget proposal to allow municipalities to tax acute care hospitals in exchange for what they are promising will be more money.

“Taxing local hospitals is a direct attack on the fabric of our communities,” Jennifer Jackson, president of the Connecticut Hospital Association, said Wednesday.

The premise behind Malloy’s proposal is to give municipalities more revenue, and at the same time the state would be able to increase its federal Medicaid reimbursement and then would agree to redistribute it hospitals.

Office of Policy and Management Secretary Ben Barnes said if all of the municipalities were to implement the tax then it would raise about $212 million in property tax revenue. The state would then provide $250.3 million in supplemental Medicaid payments to hospitals to help offset the potential tax loss.

Barnes said the tax would be more than offset by funds from the state and hospitals would benefit by about $25 million.

But the scenario sounds all too familiar to hospitals.

The Malloy administration withheld supplemental payments to hospitals last year and they were partly restored by the legislature as part of a budget deal.

The proposal is similar to the taxing scheme the state instituted, which the Connecticut Hospital Association is challenging in court.

In 2015, 24 hospitals paid $556.1 million in taxes and received only $164.3 million back from the state.

The hospitals argued that the idea of implementing the “user fee” — which they equate to a tax — was to increase the amount of federal reimbursement the state receives. In the first few years the state returned most of the money to the hospitals, but as the state’s budget situation worsened they proceeded to keep more of the revenue.

“There is a well-earn mutual distrust between the Malloy administration and the hospital industry,” Barnes admitted Wednesday. “But we are committed to working through that.”

However, Jackson said they’ve been down this road before with the hospital tax.

“The hospital tax has increased costs for patients, caused the loss of thousands of healthcare jobs, extended wait times, and reduced access to care for those who need it most,” Jackson said. “Our local hospitals are the cornerstones of our communities, providing tens of thousands of jobs and serving as a literal lifeline to the people we serve.”

She said they would fight any new attempt to tax hospitals.

Vin Petrini, senior vice president of public affairs at Yale-New Haven Hospital, said they realize the state is facing fiscal challenges and they’re more than willing to work with them, but paying more taxes sets a very bad precedent.

“Cuts come and go but taxes are usually forever,” Petrini said.

He said there’s already enough uncertainty in the health care industry at the moment.

In November the Connecticut Hospital Association appealed a Sept. 23 ruling by the Department of Social Services and Revenue Service’s to uphold the hospital tax implemented in 2012 by the Malloy administration. It also filed a petition with the federal Centers for Medicaid and Medicare Services asking it to decide if the tax violates the Medicaid Act.

In the lawsuit the Connecticut Hospital Association and 20 hospitals, Yale New Haven Hospital was not included, asked the court to end the tax and find that the state overreached in its implementation. The association says that as a result of the hospital tax and poor Medicaid funding there have been 1,390 layoffs and more than 1,700 open positions have been eliminated at Connecticut hospitals.