Bill Calling for Tax on Local Hospitals May Be Revisited This Fall

Andrew Kitchenman | June 26, 2013 | Health Care
Despite last-minute advocacy from Booker and other urban mayors, legislation stalls

A bill that would allow some counties and cities to tax local hospitals stalled yesterday despite a last-minute call from Newark Mayor Cory Booker and other mayors for the Legislature to pass the measure.

The bill would have allowed local governments to use the fee or tax to qualify for more federal funding. The local governments would keep some of the taxes, but most of the revenue would be used to increase Medicaid payments to hospitals and managed-care organizations by making more available to match Medicaid funds.

Suburban hospital officials, who believe it would set a bad precedent for more hospital taxes, oppose the idea.

The Local Hospital Fee Pilot Program Act was scheduled for a vote in the Senate Budget and Appropriations Committee yesterday, but the committee didn’t act on the measure. Supporters of the bill, S-2466 and A-4092, remain hopeful that the Legislature will pass it when it reconvenes after the November election.

Booker joined Camden Mayor Dana Redd and Jersey City Mayor-Elect Steve Fulop in supporting the bill, which was pushed by urban and “safety-net” hospitals that serve a large number of Medicaid recipients.

“This legislation is critical for hospitals in New Jersey’s cities that provide care for our most vulnerable residents,” Booker said in a statement, adding that the bill would target federal dollars toward hospitals that serve those most in need of medical care. “It will deliver resources to hospitals without burdening taxpayers or local government.”

While supporters are hopeful that Gov. Chris Christie’s administration will support the legislation, Christie spokesman Michael Drewniak said there are unanswered questions about the bill..

“We’ve committed to the sponsors that we will continue our review and consideration of the proposal,” Drewniak said.

The bill had been the subject of intense lobbying by both urban and suburban hospitals in recent months.

Suzanne Ianni, president and CEO of the Hospital Alliance of New Jersey, said the bill’s chances of passing this month were squeezed out by the focus on the state budget. Her group represents urban hospitals.

Funding for urban hospitals will be undergoing several changes in the coming years, including an expected shift in funding from programs that compensate hospitals for caring for uninsured patients toward reimbursement for caring for more Medicaid and insured patients as provisions of the 2010 Affordable Care Act go into effect.

But there is much uncertainty about exactly how these changes will affect urban hospitals.

“Safety-net hospitals and are our cities are faced with a lot of cuts,” Ianni said. “This is one way to get additional federal dollars into the state without putting up any state dollars.”

Ianni also said the proposed tax was structured so that hospitals would pay the assessment through their operating revenues, and that it would not be a direct tax on patients or taxpayers.

But there are too many uncertainties, according to Richard A. Pitman, director of the New Jersey Fair Share Hospitals Collaborative, which represents 27 hospitals not located in urban areas. In particular, Pitman is concerned that the tax would spread throughout the state.

“When you cross that line, the return trip might be impossible,” Pitman said.

Pitman said it may be a “heavy lift” to convince administration officials and legislators to oppose the bill, but he’s confident his members will be able to make that case.

“It could morph into a very substantial revenue drain on every hospital in the state of New Jersey,” Pitman said, noting that the additional federal Medicaid funding would end after five years.

Other uncertainties include how much hospitals would have to pay for the tax, how the money would be divided, and who would benefit from it.

“For years in different parts of the state, municipalities have been trying to find a way to tax local hospitals,” Pitman said. “Our not-for-profit, tax-free community hospitals earn that status every day and we think it’s a very important status to protect.”

Ianni countered that there are safeguards in place that make it an “uphill battle for approval” for the fee, with both federal and state-level checks to ensure that the assessment is not applied inappropriately.