Dartmouth Health is part of a lawsuit challenging the state’s Medicaid Enhancement Tax after negotiations between the state and hospitals stalled. Hundreds of millions of dollars in Medicaid funding are at stake in the ongoing dispute. (Photo by Alison Quantz for NH Public Radio)
A group representing New Hampshire’s hospitals filed a lawsuit Tuesday challenging a state tax on hospitals — the latest turn in an ongoing dispute over hundreds of millions of dollars in health care funding.
The Medicaid Enhancement Tax (MET) is a complicated but critical part of the state budget that helps pay for New Hampshire’s Medicaid program. The state taxes hospitals, gives them most of the money collected to offset the cost of uncompensated care and receives federal matching funds in return. In recent years, the MET generated more than $300 million annually for the state.
Hospitals and state officials have been at odds over the tax since last year, when then-Gov. Chris Sununu proposed changing how those payments are calculated and redirecting some of the money away from hospitals. Sununu said that would allow the state to maximize federal revenue, while steering more funding into priorities like mental health.
But hospitals pushed back on the proposal, saying it could threaten their financial stability and jeopardize patient care.
In a statement Tuesday, the New Hampshire Hospital Association said ongoing negotiations with the state had failed, leaving them “no choice” but to sue. Concord Hospital and Dartmouth Health, the state’s largest health system, have also signed onto the lawsuit.
Steve Ahnen, the hospital association’s president, said the impact would be concentrated on the state’s 13 largest hospitals, which collectively stand to lose around $98 million compared to the previous funding structure. That would be partially offset by increases for some smaller hospitals, but Ahnen said the net loss to hospitals overall would still be around $70 million annually.
“Significant financial losses create access challenges for patients, as hospitals have to examine all of the services that they’re able to provide,” he said. “And that’s why hospitals felt it was important to move forward” with the lawsuit.
Ahnen said the hospital association had put forward “fair and reasonable” proposals that would have lessened the impact on hospitals while still increasing federal Medicaid funding for the state, but was rebuffed by state officials.
But in a statement Tuesday, Gov. Kelly Ayotte said it’s the hospitals that have been unreasonable. She said the state had negotiated in good faith and offered solutions that would have benefited everyone, including mental health centers and smaller “critical access” hospitals.
“The State has proposed a commonsense solution that prioritizes patients and protects funding for critical access hospitals,” Ayotte said. “Unfortunately, the plaintiffs are only focused on driving more money to billion-dollar corporations and have resorted to playing political games and misleading the public.”
Disputes over New Hampshire’s Medicaid Enhancement Tax have landed in court before. In 2014, two superior court judges sided with hospitals in ruling the MET unconstitutional, because it taxes hospitals but not other health care providers that offer the same services.
Rather than appeal, the state and hospitals negotiated a settlement to preserve the MET. The most recent version of that agreement expired last year, setting the stage for the current conflict.
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