Vermont hospitals received $12 million in overpayments

The Centers for Medicare & Medicaid Services (CMS) said it overpaid hospitals in Vermont to defray the costs of a state-level provider tax, and has demanded more than $12 million in refunds, Vermont Public Radio reported.

The request for repayments are retroactive to 2010, and officials indicate many hospitals--most  in Vermont are small, rural facilities--are not financially capable of repaying CMS.

"Many of these organizations will face million-dollar adjustments over a period of three or four years which they are not prepared for and don't have the financial resources to pay back the Medicare CMS program," Michael Del Trecco, vice president for finance at the Vermont Association of Hospitals and Health Systems, told Vermont Public Radio.

The provider or bed tax has become a common financing device for hospitals in many states. In most instances, the state levies the tax on the hospitals, and it is then used to draw down matching federal funds from the Medicaid program.

The tax has proven so popular in some states that they have extended it well into the decade. Such a tax in California is expected to draw down more than $10 billion in matching Medicaid funds over the next couple of years. However, a court in New Hampshire earlier this year found the Granite State's bed tax was unconstitutional.

CMS concluded that it was overpaying Vermont's hospitals during a routine audit of Gifford Medical Center in Randolph. It determined that it had overpaid Gifford $1.6 million, and extrapolated the overpayments to other hospitals statewide.

One facility, Northeastern Vermont Regional Hospita in St. Johnsburyl, may owe CMS as much as $2.5 million. Bob Hersey, the hospital's chief financial officer, said that sum far exceeds reserve funds that are kept on hand.

"They think it's a clarification. Again, we think it's a change in policy. Hospitals in Vermont and probably in 49 out of the 50 states pay this provider tax and Medicare, through their process, their cost reporting process, specifically pays their share of the provider tax back to the hospitals," Hersey told Vermont Public Radio.

For more:
- read Vermont Public Radio's recent article on the bed tax
- check out Vermont Public Radio's first article on the bed tax

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