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New Hampshire hospital settlement passes House, Senate

Legislation needed to implement a settlement with 25 New Hampshire hospitals over Medicaid rates and a tax on hospital revenues that was deemed unconstitutional passed the Legislature easily yesterday.

The House voted 278-72 after a brief discussion to approve the deal, and the Senate did the same on a voice vote not long after. The legislation implements a settlement negotiated among Gov. Maggie Hassan, legislative leaders and the hospitals. St. Joseph Hospital in Nashua, which has sued over the tax, is the only hospital that didn’t sign onto the agreement.

“In New Hampshire, unlike in Washington, D.C., we continue to work across party lines to solve problems in order to keep our economy moving forward and to protect priorities that are critical to our people,” Hassan said in a statement released after the vote.

Steve Ahnen, president of the New Hampshire Hospital Association, said the agreement shows how the state and hospital community can work together.

“This is an important agreement that will allow New Hampshire to move forward, building a strong and sustainable health care system for our people,” he said in a statement.

Under the settlement, the tax rate would drop from 5.5 percent assessed on net patient revenues to 5.45 percent in 2016 and to 5.4 percent in 2017. It could drop to 5.25 percent in 2018 depending on whether the total cost of uncompensated care provided by hospitals drops below $375 million. Uncompensated care currently totals $427 million.

The tax brought in about $185 million this year and was used for Medicaid and other state spending. The agreement calls for all of the money to be spent on health care after the current budget, sparing the state from making deep spending cuts. The hospitals would get more state aid starting in 2015.

Hassan, legislative leaders and the hospitals negotiated for several months toward a settlement over the tax and Medicaid rates. The discussions focused on how to boost payments to the hospitals since New Hampshire’s reimbursement rate for Medicaid care is about 50 percent of the cost, which the hospitals argue is too low.

Under the agreement, the state’s two rehabilitation hospitals would no longer pay the tax. A judge had ruled this winter that applying the tax to them was unconstitutional.

In 1991, hospitals began paying the tax so the state could gain matching Medicaid funds to pay for health care for the poor. For many years, they got all of their taxes refunded dollar-for-dollar.

In 2011, the federal government said states could no longer refund all of the money and, instead, had to apply a formula that reimbursed the funds according to hospitals’ Medicaid costs. Three years ago, the Republican-controlled Legislature cut Medicaid funding to the hospitals by more than $130 million, but retained the tax. That prompted hospitals to sue.

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