The Connecticut Hospital Association is contesting the state's provider tax, which taxes 26 not-for-profit hospitals, claiming it is unconstitutional and harms hospitals' finances. The tax was imposed in an effort to obtain additional Medicaid funds.
The Connecticut Hospital Association filed letters to the departments of Social Services and Revenue Services this week to evaluate if the provider tax, which went into effect in 2012, is constitutional.
A spokeswoman at the Department of Revenue Services declined to comment.
In a prepared statement, David Dearborn, spokesman at the Department of Social Services said, “It seems that even in an industry that made $916 million last year alone—and one in which there is exorbitant CEO pay—the hospital association is asking Connecticut taxpayers to foot the bill. And all of this comes as state payments to hospitals have increased by nearly a billion dollars over the last decade, even as hospitals see fewer patients without coverage due to Medicaid expansion and the Affordable Care Act.”
The Connecticut Hospital Association claims the hospitals were told their tax dollars would be reimbursed, and they would receive additional federal funding. But since 2013, the association claims, the reimbursements have plummeted and the state is using the money to instead balance its budget.
Stephen Frayne, the association's senior vice president of healthcare policy, said of the $556 million in taxes collected by the state per year, only $14 million is returned and to only six of the institutions.
“We have a situation in which there is a provider tax, but it not helpful to the provider community. In fact it's causing significant damage to the provider community,” Frayne said.
A report by the not-for-profit Connecticut Center for Economic Analysis, which was commissioned by the hospital association to perform the study, found that if the state reimbursed the hospitals entirely, approximately 6,618 new jobs could be created and a surplus of $30 million would be generated for the state.
The Department of Social Services contends that the provider tax structure is not stripping hospitals of resources, since Medicaid payment from the state to the hospitals has increased slightly this year to $1.67 billion from $1.66 billion in 2012.
The Connecticut Department of Health Care Access reported that revenue at state hospitals has increased by $724 million since 2006.
Frayne said that if the departments uphold the current provider tax the association may appeal the decision in court. The departments have a 180 days to review the letters.
“Of course, we hope they fix it,” Frayne said. “That would be terrific.”