Four hospitals claim state owes them $40m

Four of the state’s largest hospitals have filed claims that the state owes them close to $40 million in back taxes. The amended tax returns are the first volley in a counterattack against the Legislature, which changed the rules of the Medicaid program by withholding almost $250 million in payments for uncompensated care to 13 hospitals in the state budget.Filing the claims were Lebanon-based Dartmouth-Hitchcock Medical Center, Concord Hospital, Elliot Hospital in Manchester and Laconia-based LRGHealthcare, parent company of Lakes Region General and Franklin General hospitals.For two decades, the state and the hospitals have played the Disproportionate Share Hospital (DSH) fund of the Medicaid program to tap a source of state revenue and balance state budgets.Dubbed “Mediscam,” the fiscal shell game shuffled a tax levied on hospitals, money from the state treasury and federal matching funds. Each year, on Oct. 15, each hospital paid the state a tax – the Medicaid Enhancement Tax, or MET.It worked like this: If a hospital paid $10 million, based on net revenue, the state would simultaneously return the $10 million and more, say $2 million, to the hospital as a DSH payment. The pea was under the third shell, where the Medicaid program, matched at least half, but often more, of the money the state returned to the hospitals.In this example, the hospital paid $10 million in tax, received $12 million in DSH payments and netted $2 million while the state collected $10 million from the hospital, $6 million from Medicaid, paid $12 million to the hospital and netted $4 million.As long as the state refunded 100 percent of the tax, the hospitals were willing partners. Since 1991, the state has pocketed at least $2 billion through “Mediscam.”But this year, the state decided not only to withhold the DSH payments but also to keep the MET receipts.According to the New Hampshire Center for Public Policy Studies, the change will leave nine of the state’s 13 hospitals, including the four filing claims, operating in the red.Changing rulesWhile contemplating a variety of counterstrokes, including litigation, the four hospitals, which will likely be joined by others, have begun by recalculating their past tax payments.Stephen Ahnen, president of the New Hampshire Hospital Association, told the New Hampshire Union Leader, “In the past you would always get back what you paid, so ‘no harm, no foul.'” The rules, however, have changed, he said.Henry Lipman, senior vice president and chief financial officer of LRGHealthcare, said that he reviewed the taxes paid by both Lakes Region General Hospital and Franklin General Hospital for the past four years. The MET is levied at 5.5 percent of net revenues, and Lipman said that, like other hospitals, LRGH included billings that were never paid when calculating its revenue on the understanding it would be reimbursed for whatever it paid. Therefore, LRGH paid tax on its bad debt contrary to federal regulations. Lipman estimates that LRGH is entitled to a rebate of some $9 million.Meanwhile, Dartmouth-Hitchcock Medical Center has filed a claim for about $11 million, Concord Hospital for about $10 million and Eliot Hospital in Manchester for $9 million. — MICHAEL KITCH/LACONIA DAILY SUN