CONCORD, N.H. — Gov. Maggie Hassan announced a tentative settlement Thursday with almost all New Hampshire hospitals over Medicaid rates and a tax on hospital revenues that has been deemed unconstitutional.
Hassan told House and Senate negotiators the agreement with 25 hospitals hinges on legislation, which they plan to finalize Friday, to address constitutional questions.
Under the agreement, the hospitals would get more money for the care they provide in exchange for dropping a federal lawsuit over Medicaid rates and putting on hold their state court challenge of the tax’s constitutionality. Hassan said the deal will provide stability for the state budget and the revenue used to fund state aid for the uncompensated care the hospitals provide.
Hassan, legislative leaders and the hospitals have been negotiating for several months toward a settlement over the 5.5 percent tax assessed on net patient revenues. 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 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.
St. Joseph Hospital in Nashua, which has sued over the tax, is the only hospital that didn’t join the agreement. Pamela Walsh, Hassan’s chief of staff, said St. Joseph provides little charity care and thus doesn’t benefit as much as other hospitals from state aid for uncompensated care.
Steve Ahnen, president of the New Hampshire Hospital Association, said the hospitals would have no comment Thursday on the announcement.
The tax brings in about $185 million a year. The agreement would have little impact on the current budget. The hospitals would get more state aid in 2016 and 2017.
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 their taxes refunded dollar-for-dollar.
In 2011, the federal government said states could no longer refund all 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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