NEW BRITAIN, CT — Connecticut officials are looking to use passage of the state budget as one of two reasons they believe the courts should dismiss a 2016 lawsuit filed by almost every hospital in the state.
Attorneys for the Departments of Social Services and Revenue Services filed a motion in New Britain Superior Court two weeks ago to have the lawsuit challenging Connecticut’s hospital taxing scheme dismissed because the legislature has rendered the original argument moot.
“Given that the Hospital User Fee has been repealed,” attorneys for Connecticut wrote in a motion to dismiss, “the prospective relief sought by the Plaintiffs in this action has already been provided to the Plaintiffs by the General Assembly and is no longer available for the Court to provide.”
But if that argument doesn’t work, the state is asking the court “to dismiss the present action on the grounds that the Plaintiffs have failed to exhaust their administrative remedies as administrative proceedings are currently pending before both Commissioners.”
Most of the hospitals involved in the lawsuit have also filed appeals challenging the new rate increases included as part of the state budget proposal.
The lawsuit the hospitals filed against the state has been pending as the two sides have tried to work on an agreement that would be amenable to all parties. The dispute became central to how Connecticut lawmakers were able to balance a budget that eventually passed and was signed by Gov. Dannel P. Malloy on Oct. 31.
Connecticut hospitals, with a few exceptions, filed a lawsuit against the state in 2016 challenging the way it was taxing hospitals. The taxing scheme had sought to increase provider rates and seek a higher reimbursement from the federal government, which would then be redistributed to the hospitals. During the first few years it worked fine, but as the state budget situation worsened the hospitals began to receive less and less of the money.
The relationship between the hospital CEOs and Malloy soured in 2015, and distrust between the two grew. Legislative leaders stepped in to spare the hospitals from deeper cuts and worked out a deal with them this year about how the tax and reimbursement calculations would work.
Malloy’s administration informed lawmakers that the hospitals were challenging the rate increases that would allow the state to levy higher reimbursement rates from the federal government — putting at risk approval by the Centers for Medicare and Medicaid Services.
Some legislative leaders were surprised by the development, while others said the hospitals maintained their right to appeal.
The Connecticut Hospital Association, which is a plaintiff in the lawsuit, declined comment for this article and will respond at the appropriate time in court.