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Hospitals trim tax payments

Last modified: 12/2/2011 12:00:00 AM
Hospitals across New Hampshire have opted to follow federal tax guidelines that let them send far less money to the state than in the past, cutting government revenue for November by an estimated $50 million.

'We were told we were going to get $97 million in general funds, and we got $47 million. We want to know why,' Senate Finance Chairman Chuck Morse, a Republican from Salem, said yesterday.

In reaction to the Legislature's making steep cuts to Medicaid reimbursements, hospitals have begun using federal standards that undercut traditional state guidelines when calculating how much money they owe under a Medicaid Enhancement Tax.

This summer, the New Hampshire Hospital Association asked the federal Centers for Medicare & Medicaid Services to clarify what types of inpatient and outpatient services are taxable under federal regulations.

'The types of services allowable according to CMS are far less than what the state believes are taxable, meaning the budget assumption that the MET will generate $200 million in tax revenue . . . is likely much higher than what will be realized,' the association warned in August.

In a statement this week, Steve Ahnen, president of the hospital association, said the state put hospitals in 'an impossible position' when calculating their annual MET payment last month by 'having to choose whether they file according to federal guidelines or by the state-issued guidelines.'

'Reports of a potential shortfall in the New Hampshire Medicaid Enhancement Tax should come as no surprise to anyone,' Ahnen said.

Morse said yesterday he has set up a meeting next week before the Senate Ways and Means Committee with the heads of the Department of Revenue Administration and the Department of Health and Human Services to address the revenue shortfall and the discrepancy in tax rules.

'We want to know which hospitals have done it correctly,' Morse said, referring to paying the tax according to state guidelines.

Previously, the Medicaid Enhancement Tax revenue, which is used to match a federal grant, was later returned to hospitals through the Disproportionate Share Hospital program. But those reimbursements were eliminated in the two-year budget passed this summer.

In July, 10 of New Hampshire's 13 biggest hospitals sued the state, saying the loss of Medicaid funding could violate federal law by potentially curtailing medical access for the poor.

Even at Concord Hospital, which did not join the lawsuit, President Mike Green said the check the hospital sent in last month to pay its Medicaid Enhancement Tax was for about $15.8 million - $2 million to $3 million less than the hospital had sent in past years. Green said the reduction came from the hospital taking the professional fees paid to physicians out of its calculation of net patient service revenue, which is taxed at 5.5 percent.

'In the past we weren't really all that concerned with what we paid because we recovered it in the Disproportionate Share program,' Green said.

At Dartmouth-Hitchcock Medical Center, spokesman Frank McDougall said the hospital sent a check for $43 million, which is what it would have paid under state guidelines. But it also filed simultaneously for an abatement of $7 million to recover the money it says it would not have paid under federal standards.

Additionally, Dartmouth-Hitchcock is one of several hospitals that have filed amended tax returns for the previous two years, claiming they overpaid their taxes according to federal regulations.

McDougall said those who 'suggest the hospitals are neglecting an obligation' by seeking to pay less than the state projected 'are being political and absolutely wrong.'

'The hospitals are looking for guidance in a horrible situation,' he said.

(Matthew Spolar can be reached at 369-3309 or mspolar@cmonitor.com.)


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