Human Services Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-5588

Title:

AN ACT CONCERNING THE TIMING OF PAYMENTS FROM SUPPLEMENTAL INPATIENT PAYMENT POOLS FOR SHORT-TERM GENERAL HOSPITALS.

Vote Date:

3/17/2016

Vote Action:

Joint Favorable Substitute

PH Date:

3/8/2016

File No.:

SPONSORS OF BILL:

Human Services

REASONS FOR BILL:

To ensure timely and adequate payments to hospitals from supplemental inpatient payment pools and to require that the money in the payment pools not be used for any other purpose. Substitute language adds Section 2, allowing hospitals to deduct from tax payments to the state any monies owed to them by the state.

RESPONSE FROM ADMINISTRATION/AGENCY:

RODERICK BREMBY, Commissioner, Department of Social Services, submitted testimony opposing the bill: “By making the establishment of the inpatient and small hospital supplemental pools mandatory rather than discretionary, this bill reduces the state's ability to adjust hospital funding in the state budget. This bill also requires the supplemental pool be for all hospitals, rather than certain hospitals, which could potentially increase expenditures by adding other types of hospitals not currently being paid supplemental payments, such as chronic disease hospitals.

“Although the term 'pool' is used in federal correspondence to describe the total amount of available funding appropriated in the state budget for hospital supplemental payments, there is no separate pool of funding, as all of these funds are appropriated through the General Fund. Accordingly, it would interfere with the budget process by establishing a separate interest-earning fund and would expose the state to unbudgeted increased expenditures, both by preventing transfers within state funds and also by requiring that any interest from the pool of funds be credited to those funds.

“The bill places the state at risk for unbudgeted expenditures by requiring the state to make payments first, and only later seeking reimbursement from the federal government for the federal share. That provision assumes that the federal share of payments is already included in the appropriation. However, only the state share of the funds are appropriated in the budget, and the federal share of matching funds for supplemental payments can only be obtained from the federal government after the Centers for Medicare and Medicaid Services approve each applicable Medicaid State Plan Amendment for the relevant supplemental payments. The state simply does not have those federal funds until such approvals are received.

“In a time of increasing federal oversight and state budget constraints, this bill removes the flexibility necessary to ensure compliance with federal requirements and mid-year budget adjustments. The existing statutory language already enables the establishment of supplemental payments and provides the needed flexibility to adapt to federal requirements and changing circumstances. This bill would expose the state to significant unbudgeted liability if there were delays or denial of federal matching funds, especially because the state budget includes only the state share, not the federal share of expenditures.”

NATURE AND SOURCES OF SUPPORT:

REP. WHIT BETTS, R-78, testified: “In 2011, House Republicans voiced strong opposition to implementing a new tax on our hospitals. We believed such a tax would financially burden our short-term acute hospitals. Promises were made by the Governor's Office of Policy and Management that the tax would financially benefit hospitals because they would receive federal match dollars that would be redistributed back to them.

“Unfortunately, over the last several years OPM has consistently used the revenue generated by the tax to fill the deficits left in the state's budget. Most recently, OPM notified hospitals that the state is suspending payments for fiscal year 2016 pending our budget problems, and withholding filing the state plan amendment to seek federal match dollars. OPM is effectively withholding more than $130 million from hospitals in state and federal funds. Yet hospitals are given no reprieve from paying the tax. This is causing severe cash-flow problems for our hospitals, and without immediate action they may be forced to reduce staff and/or services, ultimately hurting residents who require hospital services.

“This bill ensures that hospitals will receive payments from the supplemental payment pool on a quarterly basis going forward, and that DSS will file any state plans to receive federal matching funds. It provides that funds in the supplemental payment pool be used only for their intended purpose and not be diverted for other state purposes.

“Our state can't balance the budget's long-term structural problems on the backs of the hospitals and the residents they serve. It is imperative that the state reimburse hospitals the money that was promised. This bill attempts to fulfill that promise.”

CHARLIE JOHNSON, Chief Financial Officer, Hartford HealthCare, testified: “Every hospital in the state got a notice last Wednesday from Secretary Barnes that put a hold on making any additional supplemental payments. In his brief note he was very clear that he 'was not optimistic' that hospitals would see any further payments for the rest of the fiscal year.

“For Hartford HealthCare's five acute care hospitals this is an aggregate $110 million loss: Hartford Hospital $56 million, HOCC $21 million, Backus $16 million, MidState $13.5 million, Windham $2 million.

“The loss of funds of this magnitude at this point in the fiscal year for services that have already been provided was a real gut punch that we are still reeling from. We had the same reaction in September, when the Governor announced his deficit mitigation plan two weeks before our fiscal year was to begin. Fortunately, the legislature stood up to OPM and restored half the funding in December. Less than three months later, however, we're back in the same place we were in September.

“Since 2012 with the imposition of the Provider tax, HHC has lost $287 million and more than 1,000 positions, impacting not only the patients we serve but also the overall economy. We have taken out several hundreds of millions in our cost structure, yet are only expected at best to break even from operations this year. This will not allow us to recapitalize our plant and equipment in the future. This will mean Connecticut hospitals and health care will continue to deteriorate and fall far behind neighboring states, which are investing in health care as a growth industry.

“HB 5588 would require DSS to make timely payments to hospitals and would require that the money in the payment pools not be used for any other purpose. It would give hospitals some peace of mind at a time when healthcare faces significant changes, particularly with regard to funding.”

MATTHEW CASSAVECHIA, Director of Emergency Services, Western Connecticut Health Network, testified: “The healthcare needs are growing, not subsiding. With an aging population, we see seniors with uncontrolled diabetes, our large undocumented population with unchecked health issues, and our chronically mentally ill cycling in and out of our emergency departments as they try to manage their day-to-day life by masking their mental health issues with substance use and abuse. We serve them all with dignity and respect.

“In the most frustrating way, these cuts and taxes make our job much harder than it should be as we try to provide high quality care with substantially reduced resources. . . . Our precious funds are being diverted to the General Fund and our precious patients suffer as a result.

“That's money we would have invested in developing primary care homes and community care teams, placing clinical navigators, promoting diabetes maintenance, offering community screenings and checking in on our seniors and veterans. Instead, our organizations are forced to close programs, limit service hours and cut back on screenings and outreach, driving patients to the brink of urgency and to the most expensive point of care, the emergency department.”

PATRICIA JAGOE, R.N., Assistant Vice President, Johnson Memorial Hospital, testified: ”Johnson Memorial Hospital serves more than 3,000 inpatients and 82,000 outpatients each year and employs 800 people, including more than 200 members of the medical staff. “The estimated financial impact is approximately $5 million. Beyond the lifesaving care we provide 24 hours a day, we also contribute $131,106,000 to our local and state economies each year and invest $6,441,562 in improving the health of our community.

“Both Johnson and St. Francis will pay approximately $42.9 million in taxes as part of the $556 million in annual taxes on the state's hospitals by Connecticut's hospital tax. To arbitrarily not pay what is owed to hospitals from the inpatient payment pools will devastate a small hospital like Johnson Memorial. Programs would need to be seriously reduced and/or eliminated, as would potential expansion of employment opportunities.”

STEPHEN FRAYNE, Senior Vice President, Connecticut Hospital Association, testified:

“At this point, hospitals have made two tax payments to the state totaling $278 million and have received only $22 million in return. . . . It is clear that the administration feels it is under no obligation to respond, and there is no legislated schedule to make the payments. Our next tax payment of $139 million is due at the end of April and another tax payment is due at the end of July. Last week we learned hospitals should not count on receiving any of the remaining $142 million due for this year.”

His suggestion that hospitals be allowed to deduct from their taxes the amounts owed to them by the state was incorporated into the substitute language.

ROBERT HARTLEY, Senior Vice President, Trinity Health-New England, testified: “Trinity Health serves more than 35,000 inpatients and 372,000 outpatients each year. We employ 4,800 people, including 200 medical staff. We contribute $1.4 billion to our local and state economies each year, and invest $84.4 million in improving the health of our community. Our system also paid more than $2 million in direct property tax last year, as well as additional property tax to a large number of local municipalities through lease payments to locally owned medical office buildings. (We pay) the state more than $42.9 million annually in hospital taxes. This tax is 30 times larger than Connecticut's current corporate tax rate.”

GEORGE EIGHMY, Vice President/CFO, Bristol Hospital, testified that cuts in state supplemental payments have amounted to 5 percent of the total operating budget and forced the hospital to cut 59 full-time positions. “According to 2014 PHCA data, Bristol was the second-lowest-cost hospital in the state. It had a cost per equivalent admission of $5,889; the statewide average was $8,841. If cuts from the state continue, our only other logical option would be to attempt to negotiate higher rates from our commercial payers.”

KAREN ZRENDA, Yale-New Haven Children's Hospital employee, expressed “awe” at the exceptional quality of care she has observed there. She testified, “Good health is a blessing you don't always realize and appreciate until it is in jeopardy. Then it becomes the central issue in your life. You will want and need the best medical care. I have to believe that those suggesting withholding hospital payments, and perhaps never paying them at all, have had the good fortune of not needing these critical care hospitals. Ignorance is bliss, but it will do more harm than good.”

ROBERT SMANIK, President/CEO, Day Kimball Healthcare, testified: “Now, as we face the loss of this critical funding once again, the only conclusion I can reach is that our state doesn't care, our governor doesn't care, that access and jobs for the 100,000 people in the northeast corner of our state is expendable. . . . I urge you to keep hold of a sense of evenhandedness and wellbeing for all in our state.”

Also submitting written testimony in favor were:

STAMFORD HOSPITAL, affiliated with New York-Presbyterian Healthcare System and a teaching affiliate of Columbia University College of Physicians and Surgeons, served more than 75,000 patients in the Emergency Department in 2015, employs 2,400 people and more than 700 physicians have hospital privileges. It is completing construction of a new 640,000- square-foot hospital to open in September. “From fiscal year 2012 to 2016, Stamford Hospital will have paid nearly $100 million in taxes to the state. The impact in 2017, based on the proposed budget. will be another $28.6 million. These dollars were budgeted for bond obligations, technology upgrades, patient care and more hiring.”

YALE-NEW HAVEN HEALTH: “Our hospitals will pay more than $182 million in taxes this year. The proposed budget includes a $30 million cut to Medicaid which, taken together with the lost federal match, is a $90 million impact on hospitals. The cuts included in the DMHAS and DDS budgets also impact us. When community-based mental health programs are cut or eliminated, patients come to the emergency department. When detoxification beds are closed, patients stay longer in our acute psychiatric hospital. When DDS funds are cut, their clients become residents of our hospitals. Patient access to appropriate levels of care is compromised and hospitals remain the safety net. Our patients, families and more than 20,000 employees are counting on your support. ”

GRIFFIN HOSPITAL, Derby, serves more than 6,800 inpatients and184,000 outpatients each year. The state “payment shortfall has resulted in a halting of a multiphase construction project that will cause considerable operational disruption and increased project cost. It also is putting a refinancing of the hospital's long-term debt, designed to capitalize on the current low interest rate environment, at risk.”

WATERBURY HOSPITAL: “It is disappointing that we will not be getting paid the money we are owed for patients we already have treated.”

NATURE AND SOURCES OF OPPOSITION:

None submitted except by DSS.

Reported by: Nancy V. Ahern

Date: March 29, 2016