N.H. agencies say hospital tax valid

Two New Hampshire agencies assured Senate budget and tax writers yesterday the state's hospital tax law will be upheld and hospitals that paid a lower tax using federal guidelines will have to pay up.

Health and Human Services Commissioner Nicholas Toumpas said his department is working with the federal Centers for Medicare and Medicaid Services to clarify that the state's tax has not changed.

Some hospitals used federal tax guidelines to determine their tax liability. Hospitals paid $50 million less than expected this fall toward their annual levy. The state expects to get another $9 million this month, which would narrow the shortfall to $41 million.

The state counted on receiving $197 million, but only got $147 million. The budget earmarks $100 million for payments to providers and critical access hospitals. The balance goes into the state's general fund for other spending.

The hospitals had not questioned the state's guidelines until the budget enacted in June cut $157 million in payments to them. Ten hospitals sued over the cuts.

Senate Finance Chairman Chuck Morse warned that the Legislature may have to reopen the budget and cut spending if the state does not receive the money. He noted that if the hospitals pay the same amount next year, the state is looking at close to a $100 million revenue shortfall from the hospital tax counted on for spending in the two-year budget.

Morse said he would not have agreed to spend as much on programs for the mentally ill and developmentally disabled if he had known the hospital tax revenues could fall short. He pushed Toumpas for assurances the state would eventually get the money.

"I'm not feeling real confident that $50 million is coming in," said Morse, a Republican from Salem.

Toumpas said once the state and federal government clarify that the state's law determines the hospitals' tax liability, the state would ask the hospitals to recalculate their tax payments.

State Medicaid Director Katie Dunn said part of the problem was that the hospitals and federal government discussed how to calculate the tax liability last spring without including the state in the discussions. She said the state has had months of back-and-forth discussions with the Centers for Medicare and Medicaid Services to resolve the issue.

Revenue Commissioner Kevin Clougherty said the state's law requiring the hospital tax has not changed and once the Department of Health and Human Services and the federal government clear up any issues, the taxes would be due.