Hospitals Care for the Community Needs Help
A front page article in a recent Stamford Advocate publication, highlights the potential impact of taxes and cuts being discussed as part of the proposed 2016-2017 Connecticut budget on hospitals, and Stamford Hospital in particular. You can read the article below or also online here
The Advocate - Stamford Hospital balks at revenue tax hike
Tuesday, May 19, 2015
By Alex Gecan
While lawmakers fret over a statewide revenue gap, Stamford Hospital officials are bracing for a tax increase they say will hamper their ability to reinvest.
Hospital officials say Gov. Dannel P. Malloy's proposal -- to tax hospital revenue at 5.5 percent across the board, instead of at the current staggered rate -- would diminish Stamford Hospital's bond rating, imperil its debt service and postpone any new programs.
But they also readily admit they have no idea where else the Legislature could find money in a budget cycle that has already seen cuts in library funding and university scholarships.
"We have budget issues in the state, and I don't know where you're going to find the revenue," Kevin Gage, the hospital's chief financial officer, told Hearst Connecticut Media. "But we feel, at least, that hospitals are being burdened pretty significantly."
Lawmakers are split on how -- or whether -- to reimburse hospitals, but warn there may not be any recourse this year.
"We recognize the important work they do in the state, and the Appropriations Committee worked very hard to restore as much funding as possible," Senate Majority Leader Bob Duff, D-Norwalk, told Hearst earlier in May. "At this point, some of the most recent proposals may be the best we can hope for."
Gage forecasted that a 2 percent increase in taxes on outpatient revenue -- which would bring it up to the same rate as taxes on inpatient revenue, or 5.5 percent -- would leave Stamford Hospital with no income left over to reinvest in programs or infrastructure.
The tax hike comes at a particularly painful time for the hospital, which is a year away from completing construction on a new $450 million facility.
Of that $450 million, at least $250 million came from bond sales. And with a tax hike looming, rating agency Standard and Poor's has already advised the hospital that its bond rating is now in danger.
“They gave us a negative outlook – the tax is reference right there in our report,” Gage said.
As a nonprofit organization, Stamford Hospital does not pay property taxes to the city. Instead, the state makes payments in lieu of taxes. But those payments only reimburse cities and towns about one third of what they would collect from taxes.
But that tax relief gives Stamford Hospital the flexibility to treat to those without insurance.
“What’s unique about Stamford Hospital is we have a high rate of uncompensated care,” said David Smith, a senior vice president of the hospital.
The hospital provides $84 million in uncompensated are in a year. That figure was expected to drop after the passage of the Affordable care Act, Smith said, but so far it has not.
Hospital official say the Affordable Care Act is at the center of the financial conundrum. With the expansion of Medicaid, several states adopted taxes on hospital with the understanding that they would receive matching dollars from the federal government. The hospital would ostensibly receive redistribution roughly equal to what they had paid in taxes.
Yet while Stamford’s Medicaid patients have increased from 37,000 in 2009 to 65,000 in 2014, it has been receiving less per patient in recent years.
“We haven’t seen our undocumented care drop at all. We haven’t seen any of that projected growth in revenue that was the basis for this increase,” Gage said.
“We embarked on a really ambition redefinition, reimagining of health care in the community with the building the new hospital,” Smith said. “We did a number of contingency plans before we decided to build a new hospital and hospital tax was not one of the contingencies we had in the plan. It’s going to put us in a difficult financial situation.”
He said that there was little, if any room to cut staff, but the hospital would like be unable to launch any new programs if the tax comes to pass.
“I think it would be programs that we think are nice to have that are not critical,” Smith said.