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Greenwich Hospital Onboard with Legal Challenge Against State

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By Bill Slocum
Contributing Editor

Greenwich Hospital’s parent system, Yale New Haven Health, is supporting an initiative that could result in a legal showdown with Gov. Dannel Malloy over a provider tax they expect to cost Greenwich Hospital $20 million this fiscal year.

Yale New Haven Health is supporting a challenge by the Connecticut Hospital Association against the constitutionality of the so-called “provider tax,” initially established in 2012 by the state as a means of obtaining matching federal Medicaid money. Since then, though, the CHA claims the exchange rate has been anything but fair, as matching federal aid has trickled to a halt while the state provider tax increases.

“Other businesses pay nine percent of their net income,” says Stephen Frayne, senior vice president of health policy at the CHA. “Our tax requirement is approaching 100 percent of our net income. Some hospitals pay more, some less. But you have to pay tax whether there’s a profit or not.”

Frayne claims the situation has been particularly disadvantageous to Greenwich Hospital. Even back in 2012, when state hospitals were collectively paying out $350 million and receiving back $400 million in matching Medicaid dollars, Frayne says Greenwich Hospital “probably got back the lowest proportion of their tax payments—only 38 percent.”

Vin Petrini, a spokesman for Yale New Haven Health, says his health system, which includes Yale-New Haven Hospital and Bridgeport Hospital as well as Greenwich Hospital, pays the state $180 million annually via the provider tax, making them the largest taxpayer in the state. “It’s an honor we would be more than happy to lose,” he adds.

“The real loss is the hidden impact, the dollars not being invested in the community, in services, in the physical property itself,” Petrini says. “We have been fortunate in anticipating trends across the country, and done a lot of cost-benefit initiatives. As fast as we are taking out costs, though, the state is hitting us. We are more concerned about what’s on the horizon than where we are now.”

Petrini shared a spreadsheet showing the yearly cost to Greenwich Hospital from the provider tax since its 2012 implementation, showing a steady rise every year, from $7.8 million in 2012 (after federal reimbursement) to $19.5 million budgeted for 2016, with no federal reimbursement anticipated at all. The total expense of the provider tax on Greenwich Hospital since 2012, including the budgeted 2016 shortfall, has been estimated at $61 million.

The state argues that the provider tax only requires hospitals to pay a fair share of the state’s tax burden, and notes hospitals make enough to pay high salaries to their chief executive officers.

Both Frayne and Petrini call the comparison unfair: “A hospital is a non-profit charitable organization that earns its status by taking in everyone who comes into the door, regardless of their ability to pay,” Frayne says.

The CHA has presented their challenge against the constitutionality of the provider tax to two state agencies, the Department of Social Services and the Department of Revenue Services, who have two months to respond. If they don’t act, the case could then go to court. The challenge argues a similarity to a hospital tax in New Hampshire, removed after a constitutional challenge there.

“We are hoping to resolve this outside of a legal process,” Frayne says. “State hospitals are losing $11 million a week. We can’t allow that number to continue growing.”

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