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April 11. 2014 1:26PM

Judge declares hospital tax unconstitutional

MANCHESTER -- A trial court judge has declared the Medicaid Enhancement Tax unconstitutional on its face, the second judge to do so this year.

On Tuesday, Hillsborough County Superior Court Judge Philip P. Mangones sided with Catholic Medical Center, St. Joseph Hospital and Exeter Hospital in a suit they brought challenging $31 million in Medicaid Enhancement Tax that they had paid in 2011.

The hospitals brought the tax after the state Legislature stopped reimbursing the hospitals for the tax with federal Medicaid dollars.

Mangones sided with the hospitals in both their arguments:

• The tax is unfair because only hospitals pay it, even though doctors and clinics perform similar services.

Mangones said hospitals and clincs perform a wide range of health services: physical therapy, diagnostic imaging, urgeny care, emergency care and occupational health.

"In essence, the MET imposes a tax on hospitals simply because they are hospitals, not based on the nature of the services they provide," Mangones wrote.

• The tax was written to leverage the federal dollars through Medicaid's Disproportionate Share Hospital program, a loophole that has since closed. Mangones noted that state officials decades ago promised hospitals the tax would be repealed if the loophole closed.

It's unclear what happens next. In the past, representatives from CMC have said the ruling will likely be appealed, no matter which way the decision went.

In February, Rockingham County Superior Court Judge Kenneth McHugh issued a similar ruling in a case brought by Northeast Rehabilitation Hospital in Salem. That involved $1.4 million in MET taxes.



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