Hospital Tax May Go to Reserve

by David Gorn

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The state budget proposed by Gov. Jerry Brown extends the Hospital Quality Assurance fee, which is due to expire at the end of 2013. The complicated fee structure was originally planned to gather about $2.8 billion from private hospitals over the 30-month life of the fee. Some of the money is used to tap federal matching money, which benefits both hospitals and the state.

The state estimates extending the fee would add $310 million to the state's general fund in fiscal year 2013-14.

Private hospitals have no problem paying the Hospital Quality Assurance fee, according to Jan Emerson-Shea, vice president of external affairs for the California Hospital Association.

"The name is a bit of a misnomer. Really it's a hospital provider fee," Emerson-Shea said. "But it benefits us. We tax ourselves so the state can draw down matching federal dollars it wouldn't otherwise get and we get money back through supplemental Medi-Cal payments."

The issue for private hospitals, she said, is that the state wants to use the fee money to salt away a general fund reserve -- and the hospitals want it to go to health care services.

"We have concerns about the governor's proposal that takes that money and puts it in the reserve, so we do have concerns about that," Emerson-Shea said. The original agreement to establish the fee over two-and-a-half years, she said, had a provision to specifically focus on children's health.

"In the agreement we had with the state," Emerson-Shea said, "over that 30-month period, $900 million was to be used for children's health coverage. … It's a way to deal with the deficit as long as it's going to children's coverage. Right now we have a concern that the money would be used for the reserve, instead, going into the state's savings account."

The extension has to be approved by the Legislature in a separate bill from the budget, Emerson-Shea said. CHA is sponsoring that extension. The conversation will continue outside of the budget discussion," Emerson-Shea said.


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