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Hospital fee may not be what the doctor ordered Care centers split on whether bill will increase Medicaid funding, or be just a tax

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A bill that would boost the amount of Medicaid funding coming to New Jersey sounds almost too good to be true — and, for nonprofit hospitals in the state's wealthy suburbs, it may as well be.

The Medicaid program, which provides health care for the poor, is jointly funded by states and the federal government. One of the ways states can draw down more federal funding is by setting up provider fees, the revenue from which is matched by Washington.

Forty-two states already have such a fee, and New Jersey may now join them.

Advocates for urban hospitals are pushing for passage of S-2466, which would create a five-year hospital fee pilot program. The program, which would be limited to the state's largest cities and urban counties, would allow participating governments to levy hospital fees that would be used to garner federal matching aid for the hospitals.

The bill was among the most contentious and closely watched in Trenton, but it stalled last week after a Senate committee delayed a vote. It's now expected to return to the agenda this fall.

Urban hospitals see the program as a means to help close funding gaps for the so-called “safety net” hospitals that treat a disproportionate number of the state's poor and uninsured.

“It's a partnership, and it's hospitals stepping up to the plate to actually be a partner with the locality in drawing down federal dollars that we wouldn't otherwise be able to get,” said Suzanne Ianni, president and CEO of the New Jersey Hospital Alliance, which represents those safety net hospitals.

But suburban hospitals say the fee is just a tax, and fear the bill sets a dangerous precedent for an uncertain reward.

“My member hospitals are worried about ... sending the message to municipalities and counties in New Jersey that it's OK to tax 501(c)(3), not-for-profit hospitals,” said Rick Pitman, executive director of the Fair Share Hospital Collaborative, which represents suburban nonprofit hospitals.

At a time of tight local government budgets, Pitman said it's highly likely towns and counties will take advantage of the new taxation mechanism to help fill budget gaps. And any number of local governments could claim a chunk of the money on its way to Washington, depleting the amount that's actually matched by the federal government.

“The assumption that this is a dollar-for-dollar match I don't believe is accurate,” he said. “No one has given us any information on how much of a tax a county or municipality can put on us.”

Ianni said those concerns are unfounded, since any locality's plan would have to be approved by the state Commissioner of Human Services.

Still, Pitman, president emeritus of Shore Medical Center, in Somers Point, said the bill will create winner and loser hospitals and towns, since only a certain set of localities would be included in the pilot.

“There's a picture being painted… that suburban hospitals have it easy and urban hospitals have it tough,” he said. “Well, urban hospitals do have it tough, but so do community and suburban hospitals, for different reasons.”

The issue has divided members of the New Jersey Hospital Association, which represents 72 of the state's acute-care hospitals. The group initially proposed the bill, but spokeswoman Kerry McKean Kelly now says it will not take an official position on it.

The bill, meanwhile, faces an uncertain future. It cleared both houses of the Legislature, but on mostly party-line votes.

Ianni said the bill is misunderstood, blaming a highly visible ad campaign by the Fair Share group. But she's optimistic Gov. Chris Christie will sign the bill.

“The governor is pro-New Jersey, and this does a lot to help New Jersey,” she said.

But Pitman said he's worried too many people are buying into the idea of “let's go get some federal money, and nobody gets hurt except the feds.”

He said it's not so simple.

“I just think it's bad policy, and I think the precedent it sets is going to cause us trouble for a long time to come,” he said.

E-mail to: jaredk@njbiz.com
On Twitter: @jaredkaltwasser

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