Ayotte, hospitals settle bitter suit over Medicaid tax scheme

Yahoo

23-05-2025

The state and acute-care hospitals have settled what had become a bitter lawsuit over charges that New Hampshire was getting ready to exploit a federal cash reimbursement provision under Medicaid to land a nine-figure profit while giving hospitals $70 million less under this new design.
Gov. Kelly Ayotte announced the settlement that Attorney General John Formella's team had negotiated with the New Hampshire Hospital Association, Dartmouth Health and Concord Hospital that all had sued the state over its Medicaid Enhancement Tax (MET) program.
'This agreement is a win for our state, for rural health care access, and, most importantly, for patients,' Ayotte said in a statement.
'I am proud of my team's tireless efforts to reach a deal, and I thank Dartmouth Health, Concord Hospital, and the Hospital Association for coming back to the table to deliver the best possible outcome for everyone.'
This was the third time hospitals had sued over changes to the reimbursement. Two Superior Court judges in the past had ruled the Medicaid tax to be unconstitutional because it's imposed on the state's 26 acute-care hospitals, but not on other providers, such as rehab or day surgery facilities.
As with the previous two suits, hospital executives held further talks with state officials after the suit to reach a deal.
'This agreement is an important step toward ensuring that Dartmouth Health can continue to provide critical care to our patients and communities where and when they need it,' said Dr. Janet Conroy, CEO and president of Dartmouth Health.
'We value our partnership with the state and are grateful for Governor Ayotte's support to reach a resolution. We look forward to continued collaboration in support of a strong, sustainable healthcare system for our patients.'
According to state officials, the agreement is a 'budget neutral solution' that would deliver $1 billion in total payments to hospitals over the next three years, consistent with what hospitals had requested.
In turn, the state would receive $60 million more in benefits compared to previous proposals.
'We are pleased that we were able to reach a settlement agreement with Governor Ayotte that will help strengthen the Medicaid program, support hospitals and other essential providers, and most importantly ensure continued care for the patients and communities who count on our hospitals to be there for them when they are needed most,' said Steven Ahnen, president of the NHHA.
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 plan, the state pays back the hospitals for nearly all that they paid out in taxes, often on the same day.
The state received more than $300 million in annual reimbursements from Washington that it must spend on the federal/state Medicaid program.
The Biden administration ordered all states to change the hospital tax and payment arrangements that critics here always called a 'scam.'
Federal officials are requiring states to also make direct payments to the hospitals to receive the qualifying federal help, rather than just impose a tax on hospitals and then pay them back.
Since a 2018 settlement, hospitals, in the aggregate, had received 91% back of what they paid the state.
Former Gov. Chris Sununu last summer directed state officials to lower that reimbursement to 80% and to direct more grants to mental health, substance abuse and federally qualified health care centers that were financially beleaguered.
In her two-year state budget plan offered last February, Ayotte stuck with the 80% model for 2026-27.
Ahnen said this would have given the state $137 million more than it receives currently, while the hospitals would have gotten $70 million less than they do now.
The state's 11 largest hospitals as a group would have lost $100 million, Ahnen said.
To ramp up the pressure for a deal, Dartmouth Health, Concord Hospital and other major hospitals withheld the April 15 tax payment putting at risk the state's ability to generate the bonus federal match.
'We are encouraged that through this agreement with the state of New Hampshire quality, affordable health care will continue to be available to the patients and communities we serve at Concord Hospital Health System,' said Robert P. Steigmeyer, president and CEO of the Concord hospital system.
'We remain committed to working with state leaders to uphold our community-focused, charitable mission — now and for generations to come.'
This deal puts in the rearview mirror some tough rhetoric from Ayotte after the hospitals had filed a suit.
'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,' Ayotte said at the time. 'They should return to the table and come to an agreement that benefits all Granite Staters.'
The 'big beautiful bill' the U.S. House passed by one vote earlier this week to restore Trump tax cuts also would limit such Medicaid Enhancement Taxes to 5%.
This could cost this state and the hospitals each tens of millions of dollars in lost revenue.
Ayotte, a former U.S. senator, told reporters she won't overreact to the House proposal.
'When it's working its way through the process, it's hard to react to what the impact will be on New Hampshire,' Ayotte said.
Many Senate Republicans led by Sen. Josh Hawley of Arkansas have said they would oppose any significant cuts to Medicaid as part of this global federal budget agreement.
What's Next: The House Ways and Means Committee meets Tuesday on legislation (SB 249) that deals with this reimbursement scheme. The panel may decide to amend that bill to include terms of this settlement.
Prospects: Now that all the major parties are on board, the Legislature will follow suit and with some legislation embrace these terms.
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