A proposed tax on local hospitals has provoked a strong reaction from medical providers throughout the District, including Georgetown University Hospital, which claims the new tax will force it to reduce services and lay off employees at a time when most hospitals in the area are already facing budget shortfalls. The proposal is included in Mayor Anthony Williams’ budget for the fiscal year 2005.
Williams’ office said the new 1.2 percent tax on net hospital revenue was necessary to fund Medicaid programs that help needy District residents pay for health care. The proposed budget also includes a new 6 percent tax on revenue generated by facilities to care for the elderly and mentally retarded.
Opponents, including the District of Columbia Hospital Association, called for the City Council to reject Williams’ new tax proposals, saying the taxes would cause job losses for hospital employees as well as a reduction in the quality of medical care and higher bills for patients.
“About 60 percent of District hospitals’ budgets are concentrated in their workforces – physicians, nurses, therapists, aides, social workers, allied health professionals, dietary workers, housekeepers and many others,” read a DCHA statement. “The only way for hospitals to balance the cost of the tax will be to reduce services and reduce jobs.”
Dr. Joy Drass, president of Georgetown University Hospital and chair of the board of DCHA, commented before the City Council that the new tax would cause serious financial difficulties for District hospitals struggling to turn budget deficits into net surpluses.
“Over half the acute care hospitals operate in the red,” Drass said. “The provider tax – which we calculate at about $25 million per year – will simply exacerbate this problem by adding to the negative margin. District hospitals cannot afford this additional burden; for some it may be the last straw.”
Drass has estimated that over 70 jobs at Georgetown University Hospital may be lost if the tax is enacted.
Karen Alcorn, vice president for public affairs of Georgetown University Hospital, said the hospital stood to lose $3.5 million if the new tax was approved, a loss “which will further increase our deficit and jeopardize our financial turnaround.” The tax could also lead to overcrowded emergency rooms and impair the hospital’s ability to bring new technologies and treatments to the community, Alcorn said.
Hospital administrators also expressed concern that the new provider tax would increase health care costs, as insurers and managed care providers pass on higher costs to consumers. Health insurance coverage among workers could decrease, they said, as costs rise above affordable levels for some District employers and employees.
Hospital advocates also cited the 2001 closure of D.C. General Hospital, a major provider of health care in the District, as a major factor in increasing costs since other area hospitals had to expand services to provide care for more residents.
A letter sent to Georgetown Hospital employees by administrators said that the new tax “will impair our efforts to address long-standing problems including . [the] restoration of cost reductions sustained by our community outreach programs that were necessary to weather the financial storms in the aftermath of the D.C. General closure.”
Officials in the Williams administration have acknowledged that the new tax will be a burden, but have said the tax is necessary in order to provide health care funding for the poor.
“Nobody likes a tax, but in this particular case we definitely needed to look at revenue sources,” said Williams spokesman Tony Bullock, indicating that approximately 40 states impose a hospital provider tax. “If you look at it from our perspective, we’re providing a huge amount of . health care for the poor. We extend Medicaid coverage to large groups of individuals who would not otherwise be covered.”
Bullock also said that declining Medicaid revenues would hurt District hospitals more than a new tax because hospitals caring for uninsured patients would not receive any funds at all. He acknowledged, however, that hospitals would be displeased with the new proposal. “It’s not fun to be taxed,” Bullock said. “If we didn’t need it, we wouldn’t impose it.”
The District currently provides over $100 million annually to pay for health care for uninsured residents, according to the ayor’s office.
Financial losses by Georgetown University Hospital led Georgetown University to sell a controlling interest in the hospital to MedStar Health in 2000. Georgetown University is no longer responsible for financial losses incurred by the hospital.
