Stage set for battle over Malloy’s hospital tax proposal

Stage set for battle over Malloy’s hospital tax proposal


State hospitals have voiced their opposition to Gov. Dannel P. Malloy’s proposal to remove their exemption from local property taxes, setting the stage for the latest in what has been a series of fiscal battles between hospitals and the governor’s administration.

Wallingford Town Council Chairman Vincent Cervoni said Malloy’s budget proposal, which would cut state aid to the town by roughly $10 million, “gives us little choice” but to look at taxing Gaylord Hospital and Masonicare at Ashlar Village.

Hospitals, acute care facilities, and certain other nonprofit medical centers are currently exempt from local property taxes, with the state reimbursing host municipalities lost revenue through payment in lieu of taxes grants.

MidState Medical Center in Meriden and Gaylord Hospital and Masonicare in Wallingford all have exemptions, but Malloy’s budget proposal would allow those two municipalities to levy property taxes.

Personal property, including computers, MRI machines, and other equipment, would remain exempt.

Office of Policy and Management Secretary Benjamin Barnes said levying property taxes on hospitals could generate upwards of $212 million for municipalities, but the budget would also provide a $250 million supplemental payment to hospitals, resulting in a net gain.

Hospital leaders oppose the proposal, pointing to previous cuts in reimbursements under Malloy.

Hartford Healthcare CEO Elliot Joseph said in a statement that “the state has promised us adequate funding for Medicaid services through the federal hospital tax program in the past, but that promise was broken.”

Hartford Healthcare owns MidState Medical Center. A MidState spokeswoman deferred to Joseph’s statement. Masonicare spokeswoman Margaret Steeves said the company was still examining Malloy’s budget proposal, but also raised concerns about the trend of reduced reimbursement rates for services.

A Gaylord Hospital representative called the governor’s proposal “disheartening” and “unprecedented.”

“Hospitals, especially ours with its 100 year history, play an important role in the fabric of the community,” said Tara A. Knapp, Gaylord vice president of development, public relations and marketing. “Singling out one industry to heavily tax is unfair. At Gaylord, we care for some of the sickest and most vulnerable members of our state and community. Hindering quality care by taxing hospitals only hurts our patients. This is not the solution to the state’s budget problem.”

The state’s hospitals, led by the Connecticut Hospital Association, are challenging the hospital provider tax, launched in 2012, with both a petition to the federal Centers for Medicare and Medicaid Services and an appeal in state court.

Initially all the money generated through the tax was returned to hospitals, along with an increase in federal Medicaid reimbursements.

Budget deficits have resulted in Malloy and lawmakers adopting budgets that have returned less of that money to hospitals.

At the same time, hospitals have seen their collective tax bills increase from $349 million in 2012 to an expected $556 million this fiscal year.

“The hospital tax has increased costs for patients, caused the loss of thousands of healthcare jobs, extended wait times, and reduced access to care for those who need it most,” said CHA CEO Jennifer Jackson.

Barnes acknowledged the tension between the two sides Wednesday while discussing the budget with reporters, but said the administration is willing to put differences aside.

“There is a well-earned mutual distrust between the Malloy administration and the hospital industry, but we are committed to working through that,” he said.

Cervoni said the change would also put municipalities in a difficult position, especially as Malloy’s budget would shift around municipal aid to help struggling cities and require towns to contribute $400 million for teachers’ retirement benefits.

He said municipalities would have to at least talk about taxing hospitals and other facilities to make up the difference, which could pit towns against each other.

Cervoni expressed concern that hospitals could try to negotiate with towns for deals the way businesses have done with states.

Meriden Mayor Kevin Scarpati expressed the same concern, saying the city likely would need to negotiate with Hartford Hospital for “something reasonable” should the legislature accept Malloy’s proposal.

“We don’t obviously want to hinder or lose the potential clientele of our hospital,” he said. “We don’t want to give them a reason to leave Meriden.”

At the same time, Scarpati also said a full tax bill from Midstate could produce as much as $3 million in additional revenue for the city, making it “worth considering” seeking some, or all, of that money.” 203-317-2266 Twitter: @reporter_savino

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