Rural Southeast Georgia Hospital Opposes Hospital Tax

Wayne Memorial Hospital CEO Joe Ierardi will be on a 15-member panel to address state legislators regarding the Gov. Sonny Perdue’s proposed hospital tax at a meeting in Atlanta Feb. 10.

In the leadoff testimony for three days of administration witnesses, the governor told a joint meeting of the House and Senate appropriations committees that a 1.6 percent tax on the net revenue of hospitals and health-insurance companies would generate more than $300 million.

“That money is needed to keep from having to cut by 16 percent the amount the state pays doctors and hospitals for treating patients covered by Medicaid and PeachCare for Kids, two state-run programs for the poor,” said Perdue.

He had proposed the same tax last year, only to have the legislature refuse to approve it.

“The governor is trying to play fear politics, and we are going to fight it,” said Ierardi.

More commonly referred to as the “sick tax,” Ierardi explained that a 1.6 percent tax on net revenue will equate to $745,000 for Wayne Memorial Hospital, with payment due in full June 30, 2010, for the 2011 state fiscal budget beginning July 1.

“Imposing a tax on hospitals will wind up putting more money into their till, at least for the biggest ones that treat large numbers of patients who receive government benefits,” Perdue told lawmakers Tuesday.

It was the first time he laid out his reasoning to legislators for his bud get proposals since releasing them during a press conference last week. During his State of the State Address Wednesday, he spoke in generalities related to the hardships of overcoming the state’s lagging tax collections.

Large hospitals such as Memorial University Medical Center in Savannah and Grady Health System in Atlanta, which treat mostly poor patients, will wind up with a boost in income after the new tax, according to the governor.

“That’s because the federal government pays a portion of the cost of both insurance programs, and by imposing a tax which raises the cost that Washington pays, the state would get back $3 for every new dollar in tax,” Perdue said.

Passing the hospital tax will negatively affect rural hospitals, according to Ierardi.

“This is a game-changer; the hospital tax will alter the way health care is delivered in this state,” said Ierardi. “The Georgia Department of Community Health, by their own admission, pays only 78 percent of cost for health care provided to those receiving Medicaid. That’s cost; there is no profit. With each Medicaid patient we care for, we already lose 22 percent.”

Ierardi added that while the cost of care has continued to escalate, Medicaid has not increased health-care reimbursement since 2002.

Georgia’s Medicaid program may have a $506 million shortfall, according to a report by the Macon Telegraph.

State Health Commissioner Rhonda Medows is advocating the tax hike on hospitals and health-care plans to make up for the gap.

“I cannot find $506 million to fill that hole through cuts, program reductions, layoffs,” said Medows.

She added that the state has few options.

“To participate in Medicaid, it must provide services to the aged, blind, disabled and low-income children, and because Georgia accepted stimulus cash from Washington, it cannot cut back eligibility on optional programs such as dental coverage and prescription drugs,” Medows said.

Ierardi disagrees with this proposed method of budget balancing.

“They are looking for the most expedient way to collect the necessary money to fill the budget gap,” said Ierardi. “Rather than looking at waste in government spending, they are taking the money from health care and education without looking at the long-term consequences.”

Ierardi said he understands the need to overcome the budget shortfalls.

“We don’t mind doing our part to help with economic recovery,” said Ierardi. “But has any other industry not received an increase in reimbursement for services since 2002?”

At the Wayne County Hospital Authority meeting Thursday night, board member Ray Thornton questioned the reasoning of how the tax should be at 1.6 percent and whether governmental assessments determined that the hospitals could afford such a tax.

“I don’t know,” said Ierardi. “They haven’t asked us, and that is why we are going to have candid, direct conversation, letting our representatives know that health care is not a lottery. We take care of everyone in need of medical care.”

Ierardi said that at the meeting, the panel plans to talk with legislators, explaining the long-term repercussions of the governor’s proposed tax on rural hospitals.

While Perdue was making his presentation, the Democratic Party of Georgia issued a press release criticizing the levy that it dubbed the “sick tax.”

Jane Kidd, chairwoman of the party, said hospitals would be forced to pass the cost of the tax on to patients.

“While insurance and hospital costs will rise under Perdue’s budget, the bulk of the new revenue from the ‘sick tax’ will come directly from hospitals that raise the fees on their patients,” she said. “At a time of sickness and grief, it is fundamentally unjust to balance the state budget on the backs of Georgia’s most vulnerable citizens.”