Area hospitals leery of Pa. tax scheme

This is government math, so prepare to be confused.

The Pennsylvania Department of Public Welfare wants to take about $100 million from 33 hospitals in Philadelphia and Allegheny Counties - the areas that receive the most Medicaid money - so that it can increase Medicaid funding in those counties.

The department says most hospitals will make money in the deal because Pennsylvania can use the new assessment to leverage more federal funding for Medicaid. The federal government chips in 55 cents for every 45 cents the state spends on Medicaid, the health insurance program for the poor.

So far, hospitals are not buying the argument.

Ken Braithwaite, who leads the Delaware Valley Healthcare Council, said hospitals were worried that the cash-strapped federal government might look askance at a scheme obviously designed to grab more of its money. Even if they approve the deal now, the feds may later cut back on matching funds, leaving hospitals with an unproductive state tax. Hospitals fought hard for a 1997 state law that exempts them from taxes.

"The hospital community just doesn't see the value in taking the risk," Braithwaite said.

Michael Nardone, the agency's deputy secretary for Medical Assistance, said 16 states had similar assessments, which are allowed in federal law. They are already in place in Pennsylvania's nursing home industry.

"Given the tightness of our budget and some of the pressures that we face . . . I think it's really incumbent upon us to look at every potential source of revenue to support the program," he said.

The agency has not settled on an assessment rate or even what it would tax. It is looking at net patient revenue - total revenue from patient care - and total operating revenue, which includes all income. Federal rules allow it to tax up to 5.5 percent of net patient revenue.

Nardone said Medicaid funding would increase in Philadelphia overall, though it might fall at some individual hospitals. The extra money would be distributed in lump-sum payments rather than in higher reimbursement rates for services.

Hospital support for the proposal is important, he said. "If the hospital community isn't supportive, it will be very difficult to get done."