Hospitals Call for New Direction on Hospital Tax to Support Patient Care

On Wednesday, March 11, hospital leaders from across Connecticut provided testimony to the Connecticut General Assembly’s Finance, Revenue and Bonding Committee to voice opposition to the governor’s proposed hospital tax increase included in SB 84, An Act Concerning Revenue Items To Implement The Governor’s Budget.

During the public hearing, hospital executives and healthcare advocates explained their concerns regarding the governor’s proposal and urged the state to instead consider a new approach to the hospital tax to maximize federal investments to best support patient care.

“We believe a new perspective is needed on the hospital tax,” CHA’s Senior Vice President of Policy Paul Kidwell testified, “one that views the tax as a method to maximize federal dollars for patient care delivered by hospitals and to chip away at the $1.5 billion annual loss that Connecticut hospitals face providing care to Medicaid (HUSKY) patients; all while preserving the state’s annual share of the existing tax.  We think this is a perspective that can be shared and supported by the state and hospitals, alike.”

Testimony was provided to the committee by representatives from Connecticut Children’s; Griffin Health; Hartford HealthCare; Middlesex Health; Nuvance Health, part of Northwell Health; Stamford Health; Trinity Health Of New England; and Yale New Haven Health emphasizing the importance of a strong statewide approach to best support care delivery for patients and communities.

Connecticut hospitals already face substantial financial pressures, including significant losses tied to underpayment for Medicaid services.  Each year, hospitals provide care to thousands of patients covered by Medicaid, yet reimbursement rates fall far short of the actual cost of care, contributing to nearly $1.5 billion in annual losses statewide.

At the same time, hospitals contribute significantly to state revenues through the hospital provider tax.  In the current fiscal year alone, hospitals will pay approximately $820 million through the tax program.  Of that total, the state retains more than $500 million for general budget purposes, while roughly $300 million is used to draw down federal matching funds that support Medicaid payments to hospitals.

Under the governor’s proposal associated with SB 84, the tax burden on hospitals would grow by $100 million in new taxes in the first year with most of this additional revenue being directed to the state’s general fund rather than reinvested in patient care or used to strengthen Medicaid reimbursement.

Hospitals emphasized that increasing taxes on hospitals without maximizing federal dollars or addressing Medicaid underpayment places additional strain on healthcare providers and risks weakening the state’s healthcare safety net. 

Instead, hospitals are urging policymakers to use the hospital tax program in a way that strengthens healthcare access in Connecticut.  Specifically, maximizing federal funding opportunities and ensuring that any increases in the tax are fully reinvested in hospital reimbursement and patient care.

Representative Maria Horn (D-Salisbury), co-chair of the committee, commended the unity of hospitals at the hearing, noting, “I especially appreciate the support for CHA not as a substantive matter, but it will make the process a lot easier if we are not picked off individually and negotiating individually.”

As lawmakers continue deliberations on SB 84, CHA remains focused on advocating for policies that protect access to care, support hospitals’ ability to serve their communities, and address the underlying challenges of Medicaid underpayment.

Read CHA’s testimony here.