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Faced with the threat of a 10.25 percent cut to Medicaid payments, the Georgia Hospital Association has reversed its vehement opposition to a plan that would raise funds through a tax on hospitals' revenues.

Charles Stewart, president and CEO of Hutcheson Medical Center in Fort Oglethorpe, said late Friday afternoon that he had just learned of the hospital group's reversal and was unsure how to react.

"We don't know enough right now to even have an idea as to how we might be impacted," he said.

The hospital association's board met Thursday with state officials and decided to begin negotiating a hospital fee plan that could be used to fill a budget hole in the state's Medicaid program.

The plan, which would tax hospitals' net patient revenues, would allow the state to receive additional federal matching Medicaid funds, said Kevin Bloye, spokesman for the Georgia Hospital Association.

Members were informed of the association's change in support during a Friday conference call, he said.

"We all recognized that the budget situation at the state is in dire straits, and we've been told very clearly that hospitals are going to have to sacrifice," he said.

As originally proposed in Gov. Sonny Perdue's recommended fiscal year 2011 budget, a 1.6 percent hospital fee would collect $345 million in state funds, including $247 million from hospitals.

That money would be put back into Medicaid to draw down almost $1 billion in federal matching funds, Bert Brantley, spokesman for the governor's press office, said when the fee was proposed.

SIMILAR PLAN IN TENNESSEE

A version of the same hospital fee is under consideration in the Tennessee Legislature and has the support of the Tennessee Hospital Association. In Tennessee, most hospitals would be subject to a 3.5 percent tax on net patient revenues that would be used to draw down matching federal funds. Association members helped formulate the fee structure -- which will expire after one year if not renewed -- to ensure it contained provisions acceptable to hospitals in the state, the association has said. Hospitals that receive government assistance and critical access hospitals would be exempt from the fee.

Some hospitals would have had a net gain from the tax and others, mainly those that served fewer Medicaid patients, would have sustained losses, he has said.

The Georgia Hospital Association strongly criticized the fee plan, saying it adversely would affect too many hospitals in the state and even force some to close.

Last week, Gov. Perdue announced revised budget recommendations that removed the hospital fee, but instead would have reduced Medicaid payment rates to hospitals and doctors by 10.25 percent and removed the sales tax exemption for some nonprofit hospitals.

Those provisions would have been even more devastating, Mr. Stewart said.

"It would have had a serious impact on our viability," he said.

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