HARTFORD, CT — Plans to act swiftly to save the tax deal legislators negotiated with hospital executives as part of the budget have been slowed in an effort to get 20 hospitals to settle their lawsuit against the state claiming the taxing scheme is illegal.
Legislative leaders said they were all under the assumption that they would need to act by Friday to save the hospital tax deal they negotiated as part of the two-year budget, but were told by Democratic Gov. Dannel P. Malloy the Oct. 1 deadline isn’t necessarily a firm deadline.
“We were told today there was more flexibility than an absolute deadline of Oct. 1,” Senate President Martin Looney, D-New Haven, said after a meeting with Malloy.
It was the first bipartisan meeting that’s happened since the General Assembly passed the Republican budget. Another is scheduled for noon today.
Malloy said they’ve been communicating with federal officials and plan to submit amendments necessary to leverage the additional federal reimbursement. However, they can amend the state plan a few days after Oct. 1 if that gives them time to settle the more universal issue of the lawsuit.
In the lawsuit the Connecticut Hospital Association and 20 hospitals, not including Yale New Haven Hospital, 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.
Any action in that lawsuit, which is still pending in New Britain Superior Court, was postponed in June at the request of the state over the objection of attorneys for the hospital association.
“Throughout these years, the hospitals have tried to engage the State in both formal and informal settlement discussions to no avail, leaving the hospitals with no option but to pursue this action and other formal challenges,” Ronald W. Zdrojeski, an attorney for CHA, said in court documents in June.
He said he doubted a continuance would be helpful to his client or end in a resolution.
However, Jennifer Jackson, CEO of the Connecticut Hospital Association, said Tuesday that they remain “committed to the agreement CHA reached with the administration that was supported by legislators.”
She said they are urging legislators to act quickly to move forward with the deal they brokered as part of the budget agreement, which doubles the amount of money hospitals will get back as a result of the increase in the tax.
Malloy said it would be legal malpractice not to seek a settlement of the court case, in addition to moving forward with legislative approval of the taxing scheme.
“It would be in the state’s best interest and quite frankly the hospitals’ best interest, particularly on the attorney cost side, to reach a comprehensive agreement,” Malloy said.
Under both the Republican and Democratic budget proposals, the hospitals would receive an additional $209 million a year. They currently pay $556.1 million in taxes under the current scheme.
“To transfer $200 million plus per year to an entity without an agreement to settle claims doesn’t make a whole lot of sense to me,” Malloy said.
Under the new proposal the hospital tax would raise $900 million per year for the state, which makes it a large part of the two-year, $40 billion state budget.
While it would be ideal to get the hospital deal done before Friday, it’s still uncertain legislators could get all their members back for a vote.
Malloy said any day before Oct. 15 will give the state enough time to submit their changes to the Centers for Medicare and Medicaid Services. The changes will increase the federal reimbursement and the state will give more of the tax hospitals pay back to the hospitals.
The Malloy administration went to war with the hospitals a few years ago and attacked everything from executive pay to profit margins. Since the beginning of this year, the rhetoric changed as the two sides tried to work out their differences in court.