Hospitals again sue state over tax reimbursement plan

Yahoo

15-04-2025

Hospitals, Ayotte spar over Medicaid tax, new payments plan
Gov. Kelly Ayotte accused the state hospital lobby of "playing political games and misleading the public" after it sued the state, challenging a Medicaid Enhancement Tax it pays to leverage additional federal grants to the state.
For the third time, the state's hospital lobby has gone to court challenging the constitutionality of a state Medicaid Enhancement Tax plan that it claims cheats them out of $70 million in reimbursements to their members.
Gov. Kelly Ayotte fired back a strong response, accusing the hospitals of being solely focused on 'playing political games and misleading the public.'
The exchange reveals that a year later, Ayotte finds herself in the same place as former Gov. Chris Sununu, who engaged in a long public debate with hospital executives after he moved to divert some of their reimbursements to federally qualified health and substance abuse recovery centers.
In 1991, the state imposed the Medicaid Enhancement Tax on hospitals to qualify the state for bonus matching grants from the federal government. Under the legal maneuver, the state pays back the hospitals for nearly all that they paid out in taxes, often on the same day.
Under the arrangement, the state receives more than $300 million in annual reimbursements from Washington that it must spend on the federal/state Medicaid program of health care for the poor, disabled and many senior citizens.
The Biden administration ordered New Hampshire and all states to change these so-called disproportionate share hospital payment plans.
Federal officials are requiring states to make direct payments to the hospitals to receive the qualifying federal help, rather than impose a tax on hospitals and then pay them back.
This suit charges the state is violating the 'takings' clause of the U.S. and state constitutions because the Medicaid Enhancement Tax is imposed on all net patient revenue but then hospitals are being reimbursed only for services provided to New Hampshire residents.
For example, 40% of Dartmouth Health's patient revenue comes from care of out-of-state residents, the suit said.
'The DH Providers are paying taxes on revenue generated from services for which New Hampshire will no longer provide reimbursement,' said the six-count suit filed in Merrimack County Superior Court.
The dispute in 2024 was over Sununu's insistence that at least 9% of what comes from the Medicaid Enhancement Tax go not to hospitals but be given to other Medicaid providers the former governor said struggled to thrive.
April 15 was the date for hospitals to pay the tax, which triggered the lawsuit, according to Steve Ahnen, president and CEO of the New Hampshire Hospital Association.
'With no resolution in sight, hospitals have no choice but to file this lawsuit to protect access to important health care services for all patients,' Ahnen said in a statement.
Hospitals sue state, claim Medicaid tax scheme cheats them out of $70 million
Steve Ahnen, president and CEO of the New Hampshire Hospital Association, filed a lawsuit in superior court with member hospitals charging the new reimbursement scheme the state uses to leverage for itself federal grant money cheats them of up to $70 million they should rightfully receive back.
'The solution put forward by the governor embraces the punitive cuts to hospitals and the 80% distribution formula put in place by the prior administration. Under that formula, hospitals lose $70 million annually, to the benefit of the state, and at the expense of patient care in local communities."
Joining the NHHA in its lawsuit was Dartmouth Health and Concord Hospital, along with its affiliate hospitals.
Attorney General John Formella's office issued a statement that the state is prepared to fight the suit in court.
'The state is fully committed to ensuring access to quality health care while protecting taxpayer resources," Formella's office said.
Ayotte said her last offer would have increased grants to all 26 hospitals and provided added benefit to the more than a dozen 'critical access hospitals' that provide care in underserved parts of the state.
'Unfortunately, the plaintiffs are only focused on driving more money to billion-dollar corporations and have resorted to playing political games and misleading the public," she said. "They should return to the table and come to an agreement that benefits all Granite Staters.'
Ahnen pointed out that in the past two superior court judges found the Medicaid Enhancement Tax to be unconstitutional and an agreement only came about after hospital executives returned to the table to hammer out a compromise with state officials.
'This year, the MET is anticipated to generate $348 million; that funding will be used to bring $485 million in additional federal funding to New Hampshire to support the State's Medicaid Program,' Ahnen said.
'Without a new agreement the state would have to look to the general fund to finance the Medicaid program.'
By not getting what they requested, the hospitals could see restrictions on services that affect all New Hampshire families, Ahnen said.
'This tax increase will cause hospitals to lose $70 million and will have a rippling effect on their ability to deliver health care services to the communities who depend on them and will harm the ability of patients to get the care they need, when and where they need it,' Ahnen said. 'This will force hospitals to make decisions about the services they are able to provide.'
Leading Senate Democrats blamed Ayotte for putting at risk as much as $400 million in federal grants.
'This would be catastrophic to our state's healthcare system — the cost of healthcare for every Granite Stater will skyrocket, and hospitals, the largest employers in many communities, would be forced to cut services and potentially even close entirely," said Senate Deputy Democratic Leader Cindy Rosenwald of Nashua. "This could have been avoided altogether had the governor led on this issue.'
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