Peach punch

Hospital operators across Georgia balked at paying a new tax on their gross patient revenue this year, and precipitated an all-out lobbying assault on the proposal from Gov. Sonny Perdue.

Then the governor revealed the dismal state of Georgia’s finances, and presented hospitals with two options: either pay the new tax and see a Medicaid reimbursement increase, or don’t pay and face 10.25% decreases in Medicaid reimbursements along with the loss of exemption from state sales tax.

The hospitals decided to accept the 1.45% tax. “I think we took the best option available. It’s clear we’re in an unprecedented budget crisis at the state level, and from the hospital standpoint, it was a way to help the state get out of this mess,” said Georgia Hospital Association spokesman Kevin Bloye.

Hospitals across the country have approached similar debates in varying ways. In Tennessee, where a one-year hospital tax is being debated, the Tennessee Hospital Association this month issued a news release under the headline, “Hospitals praise legislator leadership in swift approval of fee.” To the north, the Wisconsin Hospital Association for years resisted a hospital tax but then embraced the fee in 2009 shortly before it became law.

In Georgia, the fee is expected to generate roughly $225 million in taxes from hospitals, and using the 3-to-1 reimbursement formula under federal stimulus rules, the added revenue would generate roughly $675 million in federal Medicaid matching payments, officials said.

Under this $900 million net revenue, providers will see an increase in Medicaid reimbursements of between 10% and 12%, said Bert Brantley, spokesman for the Republican governor. “To increase Medicaid reimbursement rates during this recession is something that is pretty dramatic,” he said. “It’s a good, common-sense agreement.”

The law says the fee expires in three years, a compromise that was the result of intensive negotiations between the parties, although observers were skeptical that lawmakers would truly allow the fee to vanish after Perdue and some of today’s lawmakers are no longer in power.

Americans for Tax Reform, a Washington-based not-for-profit that opposes tax increases in any form, lobbied Perdue’s office to oppose the tax. “We found it interesting that during a time of exploding costs because of healthcare reform, the governor wanted to increase taxes” on healthcare providers, said Joshua Culling, a state affairs manager for Americans for Tax Reform.

As is the case in other states, hospitals with higher concentrations of Medicaid patients stand to make more revenue in enhanced payments than they would lose in taxes, while the reverse is true for providers with smaller proportions of Medicaid patients.