Connecticut's top officials and hospitals are cheering a tentative deal they say not only resolves a longstanding legal feud over hospital fees, but also saves the government and providers money.
Gov. Ned Lamont, Attorney General William Tong and the Connecticut Hospital Association say the proposed seven-year agreement resolves years of legal tussles by lowering the tax on hospitals while allowing the state to dodge what could have been a potential $4 billion liability from the hospitals' legal claims.
Lamont described the agreement as a "new chapter" in the state's relationship with hospitals.
"This historic agreement will reduce our state's potential exposure to billions of dollars in liability and removes that uncertainty for years to come," Lamont said in a statement. "It is my hope that we can continue down this path to work with our hospitals and providers to increase the quality of care while simultaneously addressing the cost of that care."
The state Legislature must approve the proposed settlement, and lawmakers will hold their first hearing on the proposal on Friday with a special session and vote likely coming next week.
The agreement covers fiscal years 2020 through 2026. In addition to addressing the hospital fee issue, it would increase Medicaid payments and supplemental payments to hospitals and trigger $70 million in one-time refunds. All told, hospitals would go from losing $231.6 million in fiscal 2019 to gaining $123.7 million in fiscal 2026, thanks to a combination of lower fees and higher supplemental and Medicaid payments, according to a summary of the agreement.
The annual user fee that hospitals pay currently stands at $900 million, and would gradually shrink to $820 million by fiscal 2026. Supplemental payments to hospitals would increase from $493.3 million in fiscal 2019 to $568.3 million in fiscal 2026.
The agreement would require $160 million to be transferred from the state's general fund in fiscal 2019 and $20.7 million in fiscal 2020.
Sen. Jason Rojas, a Democrat who co-chairs the state's Finance, Revenue and Bonding Committee, said he still needs to read the bill in its entirety, but that an agreement on the longstanding issue is "overdue."
"It's certainly a settlement that was needed given that there was significant concern about the position of the state and how we might fare if the case was to continue through the courts," he said, "and whether we might be exposed to much larger liability than what we're actually giving up in terms of concessions under the agreement."
At Friday's public hearing, representatives from the governor's office and hospital association will take questions from lawmakers. Members of the public will also be able to testify, Rojas said. After that, Rojas said lawmakers will hold a special session next week with a decision coming Thursday at the latest.
In addition to protecting the state against billions of dollars in liability, the agreement is expected to improve the state's financial position in fiscal 2020 by about $300 million compared with the hospital user fee and payment provisions lawmakers approved during a June special session.
Connecticut's hospital tax was originally designed to capture more federal revenue to help reduce the state's deficit, according to the state's hospital association. Beginning in 2012, hospitals paid taxes to the state, which subsequently returned the money and then some. The state then claimed the reimbursements to the federal government as Medicaid payments to receive the federal match, according to the association.
The problem for hospitals began when then-Gov. Dannel Malloy began raising the tax and reducing the funding sent back to hospitals. The tax ultimately resulted in higher healthcare costs, job cuts and programs and services being shuttered, the association said. Following hospital lawsuits, the state's government approved a three-year reduction in the hospital tax burden that ends in 2020.
Jennifer Jackson, CEO of the hospital association, thanked the governor, his office and lawmakers in a statement.
"This agreement is a win for patients, hospitals and the state," she said. "Governor Lamont has paved the way for a new, collaborative relationship in which we are working together to provide patients with quality healthcare and strengthen Connecticut's economy."
