Hospitals Agree to Fee in Place of TennCare Funds

Tennessee hospitals have agreed to tax themselves which would replace proposed cuts to the state’s Medicaid program, TennCare. The board of the Tennessee Hospital Association voted unanimously Monday.

Governor Phil Bredesen wants to cut TennCare by $200 million, which is a reduction that will ultimately hit hospitals. But because the federal government matches state Medicaid funding – two to one in some instances – hospitals estimate the reduction to have a total impact of $540 million.

To compensate, the hospitals will impose as much as a 2% fee on their revenues. That will replace the $200 million cut by the state so the federal funds can still be drawn down.

THA president Craig Becker says hospitals are insisting that the fee be revisited in one year.

“There is a concern among the membership that we could end up funding the entire TennCare program.”

Under the governor’s proposed cuts, Becker says hospitals would be paying more than half of the TennCare bill.

Jim Brexler chairs the THA board and is CEO of Erlanger Health System in Chattanooga. He says the proposed cuts could ultimately shutter small, rural hospitals. But for the most part, Brexler says hospitals haven’t truly considered the impact of losing more than half a billion dollars in government funds.

“We continued to look for ways to cut and create efficiencies, but this goes over the edge with that. So we have not put a lot into that kind of doomsday scenario. We’ve put much more effort into trying to keep the state relatively whole.”

The state legislature still has to debate and ultimately sign off on the hospital revenue tax. The federal government also must approve. At least 25 other states already have similar fees on hospital revenues.

In the plan proposed by the Tennessee Hospital Association, publicly supported hospitals like Metro General would not have to pay. Hospital officials say the new fee also will not impact how much patients pay for services.