Tax plan to help Tucson hospitals cover unpaid care rejected

U.S. Centers for Medicare & Medicaid Services cited multiple reasons for turning down a proposal to assess a short- term tax on local hospitals that would have qualified them for additional government money. Phoenix passed the same tax last year and media reports say it brought in more than $270 million to that city’s hospitals.

Up to $70 million had been anticipated for the hospitals that supported the city’s request. The Tucson City Council voted in favor of the tax in August. Supporters were the Carondelet Health Network, HealthSouth Rehabilitation Institute of Tucson, Kindred Hospital of Tucson, Tucson Medical Center, Cornerstone Hospital and the University of Arizona Health Network. Those entities represent eight hospitals.

“Clearly we are disappointed,” Tucson Medical Center spokeswoman Julia Strange said. “The funding would have allowed us to strengthen our hospital’s financial position and put us in a better position moving forward in an uncertain time.

Phoenix was approved for the same tax last year and a portion of the money it collected went to fund KidsCare II, a temporary health insurance program for kids whose parents earn too much money to qualify for Medicaid. That program expires Jan. 31.

Though the decision was a letdown, it was a positive collaboration between the hospital community and the Tucson City Council, said Michael Waldrum, chief executive officer of the University of Arizona Health Network.

“We will continue to collaborate with local leaders as well as CMS (U.S. Centers for Medicare & Medicaid Services) to try to secure funding for these important medical services,” he said in a prepared statement.

Tucson City Council member Steve Kozachik was less conciliatory.

“This is an incredibly foolish decision,” Kozachik wrote in an email. “The Phoenix application was virtually identical to ours, and yet they get it, and we don’t. There is not legitimate justification for this, and the collateral damage will be our health care providers in the coming fiscal year.”

Tucson hospitals had wanted the money as a bridge to 2014, when most provisions of the federal Affordable Care Act take effect and more people are expected to have health insurance. Hospitals statewide have had to pay for soaring uncompensated care in recent years after state cuts reduced the number of people on Medicaid, which is a government insurance program for uninsured people.

“These funds would have made a significant difference in offsetting the cost of uncompensated care provided by Tucson’s nonprofit hospitals,” Carondelet Health Network president and CEO Jim Beckmann said in a prepared statement.

“While we are disappointed in the CMS decision, we are certainly proud to have been a part of such an important joint effort with fellow healthcare systems.”

The tax was made possible via a temporary state law that expires Dec. 31. Local hospitals had hoped the tax would be retroactive. Money from the tax was to be used as the basis for a 2-to-1 match for federal Medicaid funds. The Phoenix model, which Tucson copied, structures the assessment to prevent any costs from being shifted to patients, health plans or the city.

Money from the fund would be transferred to the state, minus a small set-aside to cover administrative costs. The state would, in turn, use the funding for its share of uncompensated-care payments to Tucson hospitals. A percentage of the assessment would also be used for statewide health-care needs, which was where one of the glitches in the local application occurred.

The tax was subject to approval from the Arizona Health Care Cost Containment System (AHCCCS) and federal Medicaid officials.

“This proposal was denied for multiple reasons ,” AHCCCS spokeswoman Monica Coury wrote in an email. “But probably the most significant reason was that there was no opportunity to fund additional coverage with these proposals.”

The short-term tax was intended to provide “additional coverage options” for children or adults before the expiration of the Safety Net Care Pool, the federal letter says.

The Safety Net pool was created in cooperation with AHCCCS and has provided matching federal funds of about $300 million each year for two years to Phoenix Children’s Hospital, the Maricopa Integrated Health System and the University of Arizona Health Network to cover uninsured patients. The safety net fund expires Dec. 31 and federal officials said they could not approve retroactive payments through the short-term tax.

Southern Arizona hospitals provided $134 million in uncompensated care in 2012, largely due to cuts and enrollment freezes in AHCCCS.