Hospitals present 3.5 percent fee to raise TennCare funds

NASHVILLE -- Tennessee Hospital Association leaders briefed state officials Thursday about their plan to raise $229.5 million from a 3.5 percent fee on hospitals.

Hospital officials said the money -- meant to offset many of Gov. Phil Bredesen's proposed TennCare cuts -- will be raised through what they are calling an "enhanced coverage fee" and would draw an additional $429.6 million in federal matching funds. That would provide a combined total of $659.2 million for TennCare, the state's version of Medicaid.

Tennessee Hospital Association President Craig Becker said the hospital industry is proposing the fee to avoid additional damage to hospitals as a result of current and proposed TennCare cuts. Those reductions total $430 million in state funds and a total loss of $1.22 billion, counting accompanying federal funds.

TennCare, estimated at $7.6 billion in fiscal year 2009, is funded by state and federal money.

The fee would be applied to a hospital's net patient revenues as defined by federal Medicare rules. It would last for one year but could be renewed.

And not all hospitals would pay. Government hospitals such as Erlanger in Chattanooga would be excluded from the fee, as would small "critical access" hospitals with 25 or fewer beds and rehabilitation hospitals such as Chattanooga's Siskin Hospital.

Following one meeting Thursday, Mr. Becker estimated the combined state and federal loss of funds for hospitals at $659 million, a figure he said would result in "devastation" to the industry.

"There will definitely be hospitals that close on this one," he warned. "I just don't see how they survive."

The Tennessee Hospital Association proposal instead would provide $160.1 million and do away with such plans as Gov. Bredesen's intention to establish a $10,000 annual cap on state reimbursements to hospitals for providing care to individual TennCare enrollees.

About $100 million in cuts to essential access hospitals made last year would be restored under the association's proposal, and the fee would reduce a planned 7 percent reduction in TennCare providers' reimbursements to 6 percent.

TennCare Director Darin Gordon said that, while the administration is open to the fee, officials need to see actual language in a bill to decide whether the plan will meet federal muster and not interfere with the administration's own proposed changes to the TennCare waiver, now being reviewed by federal officials.

Lt. Gov. Ron Ramsey, R-Blountville, was noncommittal after the briefing for GOP leaders. He called the plan "an interesting proposal. We'll just have to work our way through it and see how things work out."

Still, he noted, "it truly isn't a tax. It's completely voluntary (hospitals' offer). They've come to ask for an assessment. That's unusual."

He also said he doesn't see it as a tax because the money goes for a specific purpose and will not go into the state's general fund.

Following a later briefing with legislative Democrats and top Bredesen administration officials, House Minority Leader Gary Odom, D-Nashville, said, "I'm ready to go with it because the consequences without this are just unacceptable."

Hospital executives also say it should go into effect only if approved by the federal Center for Medicare and Medicaid Services.