Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 30, 1992 TAG: 9201300334
SECTION: VIRGINIA PAGE: B4 EDITION: NEW RIVER VALLEY
SOURCE: CHARLES HITE MEDICAL WRITER
DATELINE: LENGTH: Long
WILDER PRESSES FOR HOSPITAL TAX
Virginia hospitals won't have any problem paying a proposed tax to generate $60 million for the state's runaway Medicaid program, Gov. Douglas Wilder said Wednesday."They're not really concerned about the money," Wilder said of the more than 130 hospitals that would be subject to the Medicaid tax.
What really bothers hospital officials is that the tax is permanent and that it can't be passed on to consumers, Wilder said. A provision of the proposed tax requires hospitals to pay for the tax by cutting costs or reducing profits.
Wilder has crisscrossed the state the past two weeks visiting newspaper editorial boards to drum up support for his Medicaid tax, which has emerged as one of the biggest battles in this year's General Assembly session.
Hospital lobbyists - who are leading the opposition - have dubbed Wilder's proposal a "sick tax" that attempts to solve a societal problem by unfairly burdening the institutions providing care.
The governor flew to newspapers in Bristol and Roanoke on Wednesday.
Most of his remarks were directed at hospitals. Nursing homes and physicians also must pay a tax, but they have been less vocal in their criticism.
Early this winter, Wilder said, hospital officials rejected overtures from his administration to work out a compromise on raising funds for the Medicaid budget.
The Medicaid program has been the largest factor in the growth of the state budget. By 1994 the Medicaid program in Virginia will cost $1.9 billion, nearly double what it cost in 1990. Wilder's tax would generate $60 million in state funds for Medicaid over the next two-year budget. That money would be matched by the federal government, resulting in $120 million to help pay for a $743 million increase in Medicaid for 1992-1994.
"We asked the hospitals what they could do and they said, `Nothing.' They wanted us to raise everyone's taxes," the governor said.
A general tax increase isn't necessary to help pay for growth in the Medicaid budget, Wilder said. It is more appropriate to ask hospitals and nursing homes to bear an extra burden because more than half of their revenues come from public tax dollars, the governor said.
"We've been helping the state Medicaid program out since 1982," Laurens Sartoris, president of the Virginia Hospital Association, said in response to Wilder's remarks.
For 10 years, Sartoris said, hospitals lost more than $300 million because the state Medicaid program revised the way it calculated hospital fees. After a five-year court battle, the hospitals and state negotiated a new payment schedule in late 1990. The effect of Wilder's tax, Sartoris said, is to wipe out the Medicaid fee increases that are called for in the settlement.
While Wilder claims hospitals easily can absorb the tax by trimming operating expenses by a half a percent, Sartoris has a different way of measuring the impact. As a whole, hospital profits would be cut more than 11 percent, Sartoris said.
For some smaller hospitals, he said, the effect will be devastating. Using 1991 budget figures, the tax would wipe out the entire $103,000 profit margin of Greensville Memorial, a 100-bed hospital in Southside. Hampton General Hospital would have to pay 49 percent of its $743,000 profit to meet the tax.
Six hospitals in the Carilion Health System, the parent company of Roanoke Memorial, Community and Radford Community hospitals, would have to pay close to $2 million or more than 13 percent of profits, officials said.
"This is a Band-Aid on a massive hemorrhage," Carilion President Thomas Robertson said of Wilder's proposed tax. "It's not addressing the root problem of rising health care costs. We need to reform the entire system."
Lewis-Gale Hospital in Salem would pay approximately $458,000 or nearly 20 percent of its 1991 profits. Hospital President Karl Miller said Wilder's proposal was "naive" and showed "a lack of insight into the health care system." He noted that Lewis-Gale, a for-profit hospital, paid nearly $5 million in local, state and federal taxes last year.
In his remarks Wednesday, Wilder questioned whether the approximately 75 tax-exempt hospitals in Virginia need all the profits they have generated. "We want them to make money," the governor said, but he wondered how much profit was necessary to maintain equipment, fund building programs and pay salaries.
He and aides acknowledged that five state employees have been sent to find out how much money the state's non-profit hospitals are earning, as well as how much they pay their executives. Tax-exempt hospitals and other organizations must file spending figures - including salaries of top executives - that is public information.
One hospital executive, clearly irked by Wilder's swipe at the profits generated by tax-exempt hospitals, noted that the two state teaching hospitals - the Medical College of Virginia and the University of Virginia Hospital - had $34 million in profits between them last year.
"If profits are so bad for non-profit institutions, why are they OK at the state hospitals?" said the official, who asked not to be identified. "I'm not criticizing UVa or MCV. They had to do it in order to function."