Pa. budget raises assessment on hospitals

Pennsylvania is getting an extra $75 million from an assessment on hospitals under the 2018-19 budget plan, which was passed Friday by the state Senate.

The money comes from what is known as a Quality Care Assessment, adopted in 2010, under which each hospital in the state is assessed quarterly based on net patient revenues. The assessment, or QCA, started at 2.95 percent and has increased over time, with the state budget for 2018-19 putting the rate at 3.71 percent.

The Hospital and Healthsystem Association of Pennsylvania and the governor’s office agree the assessment has been mutually beneficial to the state and to hospitals. It raises $757 million overall, with most of the money being used by the state to fund Medicaid payments to hospitals, which are then matched by federal dollars.

The process works this way: The state collects the assessment, then takes its money earmarked for the general fund. The remaining amount is used to fund Medicaid payments, said Rachel A. Moore, the HAP spokesperson.

The amount going to the general fund was $220 million. That amount will increase to $295 million in the new budget plan, an additional $75 million, Moore said.

The additional assessment will be difficult for some hospitals to absorb because a third of the state’s hospitals operate on “razor-thin margins,” she said. In future years, HAP hopes that state leaders will be cognizant of that situation and refrain from imposing a higher rate, she added.

J.J. Abbott, a spokesperson for Gov. Tom Wolf, said the assessment is important for the overall budget this year.

“It is necessary for the Commonwealth to review all revenue options to ensure that we are able to meet required spending obligations to those most vulnerable,” Abbott said in an email. “The Department of Human Services’ (DHS’) reauthorization of the QCA created an opportunity to increase Commonwealth revenues and reduce the need for state general funds within the DHS budget.”

The assessment rate technically can be increased each year, he pointed out. Federal regulations limit the percentage to 6 percent, so there is room to move higher, he said.

The assessment has helped hospitals, Abbott said.

“The hospital community receives a substantial net benefit of $699 million from the assessment, more than three times the current state benefit,” Abbott said.

Moore said her group does not have hospital-by-hospital data on what each hospital pays. Pennsylvania has 169 licensed general acute care hospitals and all must pay the assessment, Moore said.

“Pennsylvania does not have a public hospital system, and the state’s hospitals are open 24/7/365 to treat all patients, regardless of their ability to pay,” Moore said. “There are no providers who only treat Medicaid patients. Even with funds generated by the assessment, Medicaid only reimburses 81 cents on the dollar for hospital costs and pays much less than other insurers.”

While HAP and its members understand the state’s budget pressures, the $75 million increase adds a lot of pressure on bottom lines, Andy Carter, HAP’s president and CEO said in a statement.

“Policymakers must realize that health care has continued to significantly change since the QCA was created – hospitals are prioritizing keeping people out of the hospital and delivering better-coordinated care,” Carter wrote. “Too large of an increase in the assessment would create uncertainty and instability and would make long-term and strategic planning nearly impossible.”

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