NASHVILLE — A proposed 3 1/2 percent state fee on hospitals’ net patient revenue won’t be passed on to patients or their health insurers, Tennessee Hospital Association lobbyists told Shelby County legislators Wednesday.

The money generated by the fee, combined with a two-to-one funding match from the federal government, will avert $659 million in cuts to TennCare reimbursements to hospitals — including a $54 million cut at the Regional Medical Center at Memphis — lobbyists for THA and the Med agreed.

THA proposed the “hospital coverage fee” as a stop-gap measure to draw down more federal Medicaid funds and avoid what it calls “devastating” cuts in TennCare proposed by Gov. Phil Bredesen to balance the state budget.

Although hospitals volunteered to tax themselves to keep TennCare intact — and most of them will get the fee back through TennCare payments for services — Republican legislative leaders have not agreed to pass it, partly out of concerns that it would be charged to patients.

“There’s a specific prohibition (in the legislation enacting the fee) against this assessment being passed on to patients or any payors in any fashion,” THA lobbyist Dan Elrod told Shelby County’s legislative delegation.

“There’s really no incentive for the fee to be passed on to patients because collectively, they (hospitals) get the assessment back through TennCare reimbursements. A violation of this bill is a licensing deficiency. And I think it would be a political disaster for any hospital to even think about passing on this assessment to patients.”

Similar hospital fees are paid in 26 other states, and 12 other cash-strapped states are now considering them.

THA lobbyist Beth Berry said proposing the fee was a “monumental step” for the association but the “cuts are so devastating that the end results of those are worse than this proposal. If the cuts go into effect, every hospital in this state loses big, as well as every enrollee in the TennCare program, as well as lots of other patients in our communities.”

A THA fact sheet given to lawmakers says that if the $659 million in cuts go into effect as scheduled July 1, “trauma centers will likely be forced to restrict when and how they accept transfers from other hospitals. The provision of high-cost services such as burn, perinatal and hemophilia services would have to be reevaluated. Rural community hospitals would have to reassess every service they provide. Some will likely close.”

–Richard Locker: (615) 255-4923

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