State hospital fee could mean less training, hiring freezes

An Ohio fee may achieve what the recession did not do for many hospitals: delay hiring, cutback training and community programs. But federal matching monies that could balance Ohio's budget may mean the fee will stay in place through 2011.

The fee, assessed at 1.52 percent of a hospital's operating budget for 2010, will help the state balance its 2010-11 budget, and is expected to bring in $718 million. The rate is scheduled to increase to 1.61 percent next year.

"We had to do a lot of really bad things to make this budget balance, and this was one of them," said Dale Miller, ranking senator on the finance committee while the hospital franchise tax was being debated. "We certainly knew this was going to cause problems."

The fee helps draw federal money because money raised by the fee is matched with federal stimulus dollars at more than 3 to 1. That federal match is estimated at about $2 billion and can fund the state Medicaid program for two years.

However, that's of little consequence to municipalities worried about the local economy, and hospitals worried about the workforce and maintaining care. At least one municipality, Middleburg Heights, is urging the Ohio legislature to reduce or eliminate the tax because of financial implications in communities through potential lost jobs or non-hiring of vacancies.

Southwest General Health Center, which is in Middleburg Heights, froze pay for its 2,500 employees for 2009. The hospital has also reduced travel and education. "Our labor market is very competitive, so we can't repeat the freeze. This was a one-time fix," said Maryann Freas, chief financial officer of SGHC. With the fee scheduled to continue through 2011, the hospital may have to re-evaluate its capital budget, including equipment replacement. The hospital's fee for 2010 is about $2.8 million.

Under the hospital assessment formula, the state will increase the amount of money, by 5 percent, that it sends to hospitals to cover Medicaid patients. The increase is supposed to soften the blow to hospitals, but SGHC estimates it might "reduce" the fee by $100,000.

To learn more:
- read this Cleveland News Sun article