Oregon hospitals claim that they will face almost $400 million in losses over the next two years under the 2009-2011 budget proposal presented to Oregon lawmakers by the state’s governor, Ted Kulongoski.
The “Governor’s Recommended Budget,” or GRB, proposes a new 4 percent tax on hospital services, with the tax revenue and corresponding federal match being used to cover all of the costs of providing insurance coverage through the Oregon Health Plan to 100,000 adults.
The OHP is the Medicaid plan in the state of Oregon. Kulongoski also proposes to reduce Medicaid payments to Oregon hospitals by almost 10 percent.
Health Management Associates, a national healthcare research and consulting firm, conducted a study for the public policy committee of the Oregon Association of Hospitals and Health Systems assessing the impact of the proposed hospital services tax.
The HMA analysis found that Oregon’s 25 largest hospitals would lose more than $200 million annually under a 4 percent tax, coupled with reduced Medicaid payments.
“Despite claims by some policymakers that this taxing scheme will more than offset hospital’s tax liability, the HMA study found that the decrease in hospital’s uncompensated care, even when coupled with the increase in newly enrolled OHP members, simply does not come close to offsetting this tax,” said Jim Diegel, CEO of Cascade Healthcare Community in Bend, Ore., and chair of the OAHHS public policy committee.
For instance, Diegel said HMA’s analysis shows that St. Charles Medical Center in Bend would lose more than $10 million a year as the result of this tax.
“That’s an impact we can simply not absorb today,” said Diegel.
Gov. Kulongoski’s office points out that Oregon’s 32 small and rural hospitals would benefit under the tax proposal. Nevertheless, these hospitals have also announced strong opposition to a 4 percent hospital tax.
“We’re deeply concerned,” said Jim Barnhart, CEO of Peace Harbor Hospital in Florence, Ore., and chair of the OAHHS Small and Rural Hospital Committee.
“The impact of these losses will extend to communities like ours as those hospitals being taxed provide essential support and referral services to small and rural hospitals like Peace Harbor,” he added.
Barnhart said Oregon’s small and rural hospitals rely on larger healthcare institutions to sustain the system of hospital care in the state. He said that as the larger hospitals’ struggles are exacerbated by the negative impacts of the proposed new tax, they in turn might have to limit the services they offer to smaller communities.
The HMA study concluded that the net loss to 25 DRG hospitals would be $208 million per year, while the net benefit to 32 A & B hospitals would come to only $11 million per year. Thus, the net loss to all of Oregon’s 57 community hospitals would reach $197 million per year.
HMA calculated the net impact to each hospital by adding the cost of the new tax to the reductions in hospital payments, then adding the benefit associated with an increase in OHP enrollment of 100,000 adults and 80,000 additional children.
Andy Davidson, president and CEO of OAHHS said the governor’s budget proposal could not have come at a worse time.
“Oregon’s hospitals are struggling with the dramatic effects of the deepening recession,” Davidson said. “We believe in and share the goals of expanding insurance coverage to more Oregonians, but the hospital tax simply does not work as a sustainable funding mechanism.”