2009-04-01 / News

Hospitals Could Face New State Franchise Fee

by David Pugh Buckeye Staff Writer

In a time when hospitals across the state are seeing revenues drop, Ted Strickland, Ohio governor, has proposed a new franchise fee.

Amanda Wurst, Strickland's press secretary, said the fee would be 1.27% of a hospital's gross revenue for fiscal year 2010, which runs from July 1, 2009 to June 30, 2010.

The following fiscal year, 2011, the fee increases to 1.37%. The franchise fee is part of Strickland's proposed budget for the next two years.

"It was a difficult budget. The governor had to make tough choices and difficult decisions," she said.

Strickland chose "to move the state forward, to invest in Ohio education, to keep college tuition from exploding, and insure access to affordable health care."

The proposed budget, "also has provisions to provide access to health care for 110,000 uninsured Ohioans. The proposal will help people access affordable private health insurance, and will be helpful to the hospitals, by reducing the number of uninsured patients.

"The proposal also increases the Medicaid reimbursement rate," she said.


Phil Ennen, chief executive officer of Community Hospitals and Wellness Centers, which operates the Archbold Hospital, said Strickland "came to hospitals with an either-or offer.

"It was either a 15% reduction in Medicaid fees starting July 1, or the franchise fee, with a 5% increase in Medicaid reimbursements."

Dean Beck, administrator of the Fulton County Health Center, Wauseon, said for hospitals statewide, the 5% increase in reimbursements is still a losing proposition. (Dean Beck's name was corrected from the published version)

Beck said Strickland's franchise fee will raise about $598 million for state coffers. But the 5% increase in Medicaid reimbursements will only generate $187 million for hospitals.

The result: hospitals lose $411 million.

"I understand what he's trying to do," Beck said.

"The federal government provides 'x' number of dollars to the state, if the state has 'x' number of dollars in the bank.

"If the states gets $598 million, the federal government will provide $1.3 billion."

Add the $598 million from the hospitals, and the State of Ohio comes out $1.9 billion ahead.

If the hospitals could get their $598 million back, the state could keep the federal money, Beck said.

If the state keeps the $598 million, and hospitals only receive $187 million from the 5% Medicaid reimbursement, where will hospitals make up the $411 million they've lost?

"Where will we get the money? From the patients. Costs will go up," said Beck.

Ennen said he fears the franchise fee "is never going to go away.

"We need to see more money from the state back to us," he said.

Ennen said he's enjoyed working with the Strickland administration, "but I don't like this program very much.

"There's got to be something in between we can work on."

Currently, Strickland's budget proposal is under consideration in the Ohio House and Senate, and Ennen has been in touch with Bruce Goodwin, state representative (R-Defi- ance), who represents Fulton County.

Difficult Times

Like every business in Ohio, hospitals have seen business decline.

Ennen said in Northwest Ohio, times "are more depression like than recession-like," given the region's industrial base and current unemployment rates.

While inpatient business remains steady, outpatient visits, the majority of a hospital's business, are off, Ennen said.

Additionally, Beck said unpaid services, charges the hospital writes off as charity, are up.

"We've had a slowdown since the first of the year," Beck said. "Patients are putting work off.

"Our revenues are going down and it's impacting our fi- nancial stability."

Ennen said across the CHWC system, 10 employees have been laid off.

Beck said he's doing everything he can to avoid layoffs, including stopping construction and remodeling.

"Anything that takes cash, we're holding," he said.

There's a hiring freeze in effect at FCHC, and workers are taking voluntary time off.

When asked if layoffs are coming to FCHC, Beck said, "I don't want to think about that. I won't say they never will come, but I'm hoping we can ride things out."

Beck said he wants to avoid layoffs, because it takes time to train workers, and "a lot of them have spouses who are unemployed."

Beck said with the poor economy, unemployment is up, and people are losing health care benefits.

Many employers are changing their health insurance programs to Health Savings Accounts, with high-deductible insurance.

"We've seen a lot of $5,000 deductibles," he said.

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