Governor signs bill to reduce hospital tax, increase reimbursements

YNHHS CEO Marna Borgstrom, fourth from left, was among Connecticut healthcare leaders and legislators who joined Connecticut Gov. Ned Lamont for the ceremonial bill-signing

On Jan. 13, 2020, YNHHS CEO Marna Borgstrom and representatives from the Connecticut Hospital Association (CHA) joined Governor Ned Lamont as he signed a bill ending a four-year legal battle between hospitals and the state of Connecticut over the provider tax the state imposed on hospitals.

When the tax plan was created in 2011, hospitals were to pay $350 million annually in taxes to the state. The state would then return all of the money to the hospitals, plus an additional $50 million, after the state received federal matching funds.

Over the years, however, as its financial condition worsened, the state kept an increasingly significant portion of the tax it collected from the hospitals. Last year, Connecticut’s hospitals paid $900 million to the state and received only $493 million back. Between 2012 and 2019, YNHHS paid $1.5 billion in taxes and received $634 million back, a loss of nearly $900 million over that period. Despite its non-profit status, Yale New Haven became the state’s largest taxpayer.

Determining that a lawsuit filed by the CHA over the provider tax could ultimately cost the state as much as $4 billion, the Connecticut Legislature in December 2019 approved a settlement negotiated between the Governor and hospitals that includes:

• A one-time, $79 million refund and other one-time payments to hospitals
• Reductions in the provider tax on hospitals and increases in state payments to hospitals through 2026
• An annual increase of 2 percent or more in Medicaid reimbursement rates for the care hospitals provide to low-income patients

“This was an important re-set in the relationship between the state and hospitals,” Borgstrom said. “I want to thank our employees, who played an important role in securing this agreement through their advocacy. Over the past several years, our employees, along with their family members and friends, have shared personal experiences with legislators to help them understand how the provider tax, reduced reimbursements and other proposals could limit people’s access to care when they need it most.”