N.H. hospitals rebuff Senator’s $38M escrow plan, demand payments from state

  • Senate President Chuck Morse (back left), R-Salem, confronts New Hampshire Hospital Association President Steve Ahnen (front left) over a long-running dispute over hospital uncompensated care payments on Tuesday, April 24, 2018. Ethan DeWitt / Monitor staff

Monitor staff
Published: 4/24/2018 8:46:08 PM

A plan by Senate President Chuck Morse to set aside $38 million in escrow was intended to address a looming budget shortfall the state faced over a hospital payment lawsuit.

Now, New Hampshire’s hospitals are threatening more lawsuits.

In a heated, two-hour hearing before the Senate Finance Committee on Tuesday, hospital representatives squared off with senators over the plan, which comes after a March federal district court ruling put the state on the hook for up to $38 million more than budgeted for in payments. Morse’s plan, presented as an amendment to House Bill 1102, would take the money from the state’s general fund and set it aside for the hospitals, but it would hold the money in escrow until all legal appeals are exhausted.

On Tuesday, hospitals rejected that approach, arguing that the latest ruling has created an obligation for the state that it must meet by May 31 – a federal deadline. Not doing so, they added, would force the matter back to the courts.

“(The amendment) would mean that there’s going to be litigation, that is not anyone in this room’s desire.” said Scott O’Connell, an attorney representing a group of New Hampshire hospitals. “I urge you not go down that path.”

The standoff comes out of a March 6 decision in federal district court in Washington, D.C. That ruling voided a 2017 federal rule that effectively lowered the amount owed to hospitals for uncompensated care, and which the Legislature had relied upon in crafting the budget. With the rule voided, the state owes up to an additional $76 million to hospitals by May 31 – half of which must come from the state.

Under federal Medicaid law, states and the federal government must give money to hospitals that take in high numbers of uninsured and Medicaid patients to help them recoup their losses – known as disproportionate share hospital payments. But exactly how those funding totals should be calculated has long been a subject of dispute.

In an April 10 letter to New Hampshire hospitals, the state deputy attorney general, Ann Rice, acknowledged the March 6 decision changed the federal payment formula and said the state would honor the increased obligations, adding that the hospitals might owe the money back if future courts overturned the ruling. In turn, hospitals relied on those letters in determining how much they would pay for the state Medicaid Enhancement Tax, owed April 16 – they paid more assuming they would receive more back in state payments, representatives said Tuesday.

But despite the letter, Morse opposed giving the hospitals the money this year, contending that the D.C. decision will ultimately be overturned on appeal and the original rules upheld. Holding the money in escrow would allow both parties to wait out the result responsibly, the Salem Republican argued.

“I believe the hospitals are wrong in their position,” he said. “Be that as it may, the legal answer to that will play itself out. However, as the state, I believe we must protect ourselves, and the hospitals quite honestly, when it comes to health care.”

Hospital representatives disagreed. Many wrote letters to the state’s attorney general saying that they would have to cut services and open lines of credit if the payments didn’t come through.

Meanwhile, hospital officials pointed to a bigger factor at play: the state’s 2014 funding agreement. After a separate 2011 lawsuit, the state reached an agreement in 2014 that set maximum and minimum limits for uncompensated care payments through fiscal year 2019.

By paying the lower rates, hospitals contended, the state would be in breach of that agreement, which had capped the amount owed by the state to cover uncompensated care. With the state in breach, hospitals could then sue for the full amount in uncompensated care owed – tens of millions of dollars more than under the agreement, representatives argued.

“If the state walks away from this deal ... we will not consider ourselves bound by the cap,” O’Connell said. “We will seek the full amount of uncompensated care that we are entitled to, and it’s well in excess of $237 million.”

Morse, in return, cast doubts that the hospitals had not planned ahead for the lowered appropriations in the budget, and said allowing the hospitals to take the money now could mean a worse situation down the road should the courts overturn the ruling and the hospitals be obligated to pay it back.

The opposing positions made for a contentious, theatrical hearing Tuesday, at one point sparking a near-shouting match between Morse and Steve Ahnen, president of the New Hampshire Hospital Association. And the spectacle echoed a protracted political and legal dispute between lawmakers and hospitals over the payments, which has drawn in seven years of audits, state and federal lawsuits and negotiations.

The March 6 federal district court decision had brought hospital leaders and state officials into negotiations in recent weeks, which parties on both sides had hoped would lead to a path forward. But those negotiations stalled after hospitals declined the state’s offer, Morse said Monday. Tuesday’s hearing put both sides’ emotions on display.

Democrats on the committee objected to Morse’s escrow arrangement, raising concerns that drawing from the General Fund could hurt present spending initiatives and that the money should come from the existing uncompensated care fund. And they railed against the negotiation process, which they said lacked transparency and involvement by Democrats.

It is unclear how the committee might vote for the amendment. But O’Connell said the hospitals are hoping the state can reverse course and pay the amounts they say are owed.

“Not one of my clients wants to make policy in this state by litigation,” he said. “Not one. All they want is the state to follow its agreement and follow the law.”

(Ethan DeWitt can be reached at edewitt@cmonitor.com, or on Twitter at @edewittNH.)

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