Massachusetts Senate approves $100 million insurance fee for flush hospitals

Analyses by the Massachusetts Division of Health Care Finance and Policy (DHCFP) painted a rosy financial picture for many of the state's hospitals, so the Massachusetts Senate didn't appear to think twice about passing a bill (on a 33-4 vote) that includes a $100 million assessment (i.e., tax) on the state's wealthiest hospitals to help small businesses pay for health insurance.

Under the bill, hospitals with operating profit margins of more than 2.5 percent for the two most recent fiscal years would pay a one-time assessment fee of either 0.75 percent or 1.25 percent of annual patient revenues, reports The Republican. Safety-net hospitals serving high Medicaid and Medicare populations would be exempt.

The regional system Partners HealthCare System Inc., which has seven hospitals, probably would pay more than the $40 million it has already volunteered into the assessment fund, reports the Cape Cod Times. That's not good news for Partners, which saw its income drop 35 percent to $22.5 million in the second quarter of fiscal year 2010 ended March 31 compared to the year-ago quarter, according to the Boston Globe. Nonoperating income, primarily from investments, prevented an even steeper drop-off. The system's operating income for the quarter plummeted to $13.1 million vs. $36 million a year ago.

Yet the DHCFP reports revealed that state hospitals have deep reserves: more than $17.2 billion in total net assets as of September 2008. About one-third of that total ($5.7 billion) was attributed to Partners. The DHCFP also found that 80 percent of the states acute-care hospitals had higher profits in 2009 than in 2008.

Supporters of the measure expect the provider fee to reduce consumer premiums by up to 2.5 percent. The legislation now goes to the state House for action.

To learn more:
- read this Cape Cod Times article
- read this article from The Republican
- read these Boston Globe reports: article 1, article 2 or article 3
- read this Associated Press article
- read the report, Study of the Reserves, Endowments, and Surpluses of Hospitals in Massachusetts
- read the report, Massachusetts Acute Hospital Financial Performance: Fiscal Year 2009