State, hospitals still at odds over Medicaid taxes owed
“Hospitals claim that only revenue from services reimbursed under Medicaid is taxable under the MET,” Department of Revenue Administration Commissioner John Beardmore told the Medicaid Enhancement Tax Study Commission. “This is not correct.”
Hospitals contend that only the Medicaid payments are taxable, and also claim such things as laboratory fees, X-rays, physical therapy and professional services should be exempt.
The disagreement centers on what outpatient services are covered by the tax. That debate has lead to MET revenues dropping from $200 million annually prior to fiscal year 2011, to $176 million in fiscal year 2012 and $185 million in 2013.
At the same time, lawmakers stopped reimbursing the state’s largest hospitals for uncompensated care, although the program continued for small rural hospitals.
Ten of the state’s largest hospitals sued the state over changes to its Medicaid program. The suit is pending in federal court. Several hospitals also filed suit in Hillsborough County Superior Court challenging the MET’s constitutionality.
Committee member and Dartmouth-Hitchcock Chief Financial Officer Robin Kilfeather-Mackey said the guidance is inconsistent with negotiations hospitals had with the Department of Revenue Administration last year. She said that is troubling. She noted hospitals have to file estimated tax returns next month and said the difference could be millions of dollars.
Currently under the MET, hospitals’ net revenue for in-patient and outpatient services is taxed at 5.5 percent, one of the highest rates in the country. The MET revenue is used to pay providers in the Medicaid program, for Disproportional Share Hospital program payments and for other state expenses.
The committee will hear from a Dartmouth Hitchcock official on the fairness of the tax and from a representative from a small rural hospital at its next meeting Sept. 25.
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