Tennessee hospitals push for tax to offset cuts to TennCare

By Chas Sisk • THE TENNESSEAN • February 9, 2010 The Tennessee Hospital Association's members will push for a temporary tax on their revenues to reduce cuts to the TennCare program proposed last week by Gov. Phil Bredesen. The association's board voted Monday to approve a one-year "coverage fee" of 1 percent to 2 percent that would raise money for hospital services scheduled to receive less funding from TennCare. The fee likely would go into effect July 1 and would not be passed along to patients, association officials said. The group also will lobby the state to dip further into reserves and to use any additional revenue that comes into the state to reduce TennCare cuts. "We care about patients. We care about continued delivery of services," said the board's chairman, James Brexler, the president and chief executive of Erlanger Health System in Chattanooga. "We have done our part." The unusual move — which means hospitals essentially will lobby the legislature to tax them — is meant to offset some of the $370 million in TennCare cuts proposed by Bredesen as part of next year's budget. The legislature will hold hearings on the budget proposal this week and must vote on a new spending plan by June 30. Because the federal government sends Tennessee two dollars to three dollars for every dollar the state spends on TennCare, hospitals estimate that the Bredesen administration's cuts to TennCare could take as much as $1.5 billion out of Tennessee's health-care system. That would cost hospitals more money than the tax, hospitals believe. Some are exempt Government-owned hospitals such as Nashville's Metro General would be exempt from the tax, officials said. Revenue from the tax would go into a trust fund that could be used only for hospital services — such as reimbursements for indigent care, funding for graduate medical education and coverage for inpatient services — that would be reduced when the new budget year starts this summer. The exact level of the tax would depend on the specific programs that would be funded with it, but hospitals estimate they would need to raise a maximum of $200 million from the tax, said Craig Becker, the association's president and chief executive. The tax would apply even to hospitals that see few TennCare patients, but they voted to approve the tax, nevertheless. Becker said he'd received a favorable response from Gov. Bredesen's administration about the proposal. "We were unanimous in authorizing this alternative to this amount of a cut . . . and the fact that a fee was the best of the options that were available to us," Brexler said. "I think it would be a little overstated in saying we were all unanimous in our support for creating a fee."