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State Nears Settlement With Most Hospitals

Todd Bookman

Governor Maggie Hassan has announced a tentative settlement with almost all the hospitals in the state over Medicaid rates and a tax on hospital revenues that two judges have said is unconstitutional.

Hassan told legislative negotiators Thursday the agreement with 25 hospitals hinges on legislation to address constitutional questions raised in court. The hospitals would get more money for the care they provide in exchange for dropping a lawsuit over rates and putting on hold their challenge of the tax's constitutionality.

St. Joseph Hospital in Nashua, which has sued over the tax, is the only hospital that didn't join the agreement.
The tax brings in about $185 million a year. The agreement would have little impact on the current budget. The hospitals would get more money in 2016 and 2017.
Full Text of Governor Maggie Hassan's Press Release:

Governor Maggie Hassan today announced an agreement in principle to settle 25 New Hampshire hospitals’ outstanding challenges to: the constitutionality of the Medicaid Enhancement Tax, to claims that the hospitals had filed for refunds on their 2014 tax payments, and to Medicaid rate reductions made in previous years. The legislature must approve the agreement in order for it to move forward. The agreement will provide stability for New Hampshire’s budget while ensuring that revenues driven by hospitals are used to fund critical health care services including uncompensated care. Only St. Joseph’s Hospital in Nashua, which traditionally has provided little uncompensated care, has refused to participate in the agreement. “I am pleased that we have reached a settlement with hospitals that is fair to them and fair to other New Hampshire taxpayers. This settlement agreement will provide critical stability to our state budget while bringing us nearly all the way back to the situation that existed before funding to hospitals was cut in 2011,” Governor Hassan said. “I am hopeful this settlement, combined with our efforts to expand access to health insurance coverage, will allow us to resume the important and productive partnership that existed between the state and our hospitals for so many years. Our joint efforts will help improve health care for all of our citizens and help reduce the cost shifting that increases costs for both consumers and businesses.” Under the agreement, the state would agree to provide “disproportionate share” (DSH) payments to critical and noncritical access hospitals. Critical access hospitals would be reimbursed 75 percent of their uncompensated care costs, and noncritical care access hospitals would receive no more than 50 percent of their individual uncompensated care costs in Fiscal Years 2016 and 2017. The state’s liability would be capped at $224 million in total payments that are shared with the federal government. Based on aggregate uncompensated care estimates, the state’s liability is expected to range between approximately $45 and $95 million for the biennium, depending on actual levels of uncompensated care. In Fiscal Years 2018 and 2019, critical access hospitals would continue to be reimbursed 75 percent of their uncompensated care costs. Other acute care hospitals would receive no more than 55 percent of their uncompensated care costs, up to a cap of $241 million. The state’s liability for FY 18 and 19 is expected to range between approximately $35 million and $80 million, as compared to FY 15. The hospitals are guaranteed at least $175 million a year in DSH payments. Payments to hospitals would be contingent on Medicaid Enhancement Tax revenues reaching agreed upon estimates. If revenues fall short of the estimates, state payments to the disproportionate share pool for noncritical access hospitals will be reduced. “The terms of this settlement build on the thoughtful work and ideas of a number of people, including Senate President Chuck Morse, Senator Bob Odell, Representatives Cindy Rosenwald and David Hess, and the entire leadership of the House and Senate,” Governor Hassan said. “This agreement was also only possible because of the bipartisan steps we are taking together to improve health care and reduce the uncompensated care burden on hospitals, including the New Hampshire Health Protection Plan, the mental health settlement, and the proposed 1115 waiver that we are submitting to the federal government. We will need to continue our bipartisan cooperation in order to make this settlement a reality and to manage future budget decisions in a way that continues to protect the health and financial security of New Hampshire citizens.” The state agrees to put all money raised from the Medicaid Enhancement Tax in a trust fund and use those funds exclusively to support Medicaid services, including funding DSH payments, hospital provider payments, and other Medicaid costs. The agreement also eliminates certain freestanding rehabilitation hospitals from the Medicaid Enhancement Tax base, and also precludes them from receiving uncompensated care payments. The agreement is contingent on legislative approval. Though the settlement is agreed to in principle, the hospitals acknowledge that the state is taking legislative steps intended to further clarify that the state has a rational basis for the Medicaid Enhancement Tax and that the tax also complies with federal law. Through the agreement, the participating hospitals agree they will not challenge the MET on constitutional grounds as long as the terms of the agreement are met. If the legislature does not approve the agreement, or future legislatures choose to cut funding, the hospitals retain the right to re-launch their litigation and the state retains all of its defenses. Through the agreement, the participating hospitals agree to drop their claims for tax refunds in 2014 and 15 and drop their participation – and claims – in lawsuits challenging the constitutionality and application of the Medicaid Enhancement Tax. They also agree to drop claims in state and federal court cases challenging rate reductions made beginning in 2008.

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