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Kansas Hospitals Fighting Proposed Increase In Provider Tax

Mercy Hospital, Independence

At the beginning of the 2015 legislative session, Kansas hospital administrators signaled their willingness to talk about increasing a state assessment on their revenues to fund Medicaid expansion.

They anticipated that the state’s deteriorating budget situation would make it impossible for Gov. Sam Brownback and Republican legislative leaders to consider expansion without a way to pay for the state’s share of the costs.

And they anticipated that even with funding options, Medicaid expansion was a long shot to pass.

Supporters say they still hope to force floor votes on an expansion bill, although Brownback and legislative leaders remain opposed to it.

But it’s clear that hospital officials didn’t anticipate the turn of events that has put them on the defensive in the final weeks of the session.

Brownback and key lawmakers are now talking about raising the provider assessment. But they see it as a way to help balance the budget rather than fund a Medicaid expansion plan.

“This is extremely frustrating to say the least,” said Tom Bell, president and chief executive of the Kansas Hospital Association. “This is a tax on hospitals — community hospitals in the state of Kansas — and there is no corresponding benefit that’s going back to the hospitals.”

Shawn Sullivan, Brownback’s budget director, wants to increase the assessment to help close a gap in the current year’s budget and fill a revenue hole of more than $400 million in the fiscal year that begins July 1. The proposal is included in a governor’s budget amendment that Sullivan submitted to the Legislature in late April.

Increasing the assessment on in-patient revenues from 1.83 percent to 2.55 percent would generate an additional $18.7 million a year for the Health Care Access Improvement Program (HCAIP). The current assessment raises approximately $40 million, which is used to leverage another $60 million in federal matching funds.

Without an increase in the assessment, administration officials say, state general fund dollars will be needed to subsidize HCAIP, which was created in 2004 to increase the Medicaid rates paid to doctors and hospitals.

“What we’re seeing is that HCAIP funding is not sufficient to cover existing utilization,” said Mike Randol, director of health care finance for the Kansas Department of Health and Environment, the state’s lead Medicaid agency. “The intent never was for general revenue to subsidize that.”

There is no need to increase the assessment, Bell said. The HCAIP fund has fluctuated over the years, but he said the assessment has generated sufficient revenue to replenish it.

“It has always been worked back to where it’s pretty much at a break-even point,” he said. “And I don’t know why that wouldn’t happen again absent some trend that the administration is seeing that we don’t know about.”

The governor’s proposed budget amendment said that state general fund money has been needed “in recent years” to shore up the HCAIP fund and that an increase in the assessment is necessary until legislation is passed that would allow the rate to fluctuate.

Bell isn’t convinced that the administration’s numbers are accurate.

“I don’t like saying this, but when the data has fluctuated as much as it has, it raises questions about its validity,” he said.

So, Bell wants the data audited and examined by the eight-member panel that oversees the HCAIP.

A hike in the provider assessment would increase the financial pressure on Kansas hospitals already being squeezed by the state’s rejection of Medicaid expansion, Bell said, pointing to Mercy Hospital in Independence as an example.

In March, David Steinmann, chief executive of the hospital, said he was anticipating nearly $570,000 in cuts to Medicare reimbursements and federal disproportionate share hospital payments, which are designed to partially cover the costs of treating uninsured payments.

The proposed increase in the provider assessment would cost the Independence hospital another $53,000, according to the Kansas Hospital Association.

Expanding Medicaid would generate an estimated $1.6 million in additional revenue for the hospital, more than enough to offset the anticipated reductions and the proposed increased provider assessment.

Jim McLean is executive editor of KHI News Service in Topeka, a partner in the Heartland Health Monitor team.

Jim McLean is a political correspondent for the Kansas News Service, a collaboration based at KCUR with other public media stations across Kansas. You can email him at jim@kcur.org.
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