L+M joins lobbying effort to repeal state's $254 million tax on hospitals

A move to repeal the state tax on hospitals is gaining momentum, with at least seven bills pending in the General Assembly calling for a phase-out or immediate elimination of the levy imposed in 2012 as a way to close the state budget deficit.

Last week, Lawrence + Memorial Hospital in New London sent a letter to its 225 corporators and 75 honorary corporators, asking them to join in lobbying legislators to repeal the tax. The letter provides a sample text for a letter to lawmakers urging they support or submit a bill to phase out the tax over five years starting July 1, arguing that the tax hurts patients, access to care and L+M's 3,000 employees and physicians.

Written by William Stanley, vice president for development and community relations, the letter also notes that 2014 was a "difficult year financially" for L+M, a reference to the fact that it ended the past two fiscal years in the red.

Stephen Frayne, senior vice president for health policy at the Connecticut Hospital Association, said the tax costs the state's 29 nonprofit hospitals $254 million annually.

"That's a pretty large tax considering that amount is divided among just 29 taxpayers," he said. "Whether hospitals are in the red or not, this is a new cost being borne by the health care system. We'd prefer these resources go to patient care and not to balancing the state budget."

Stanley said the tax cost L+M $1.9 million in fiscal 2014. In the current fiscal year, the tax is slated to increase to $7.4 million, he said.

The tax was originally enacted as a complicated means of leveraging additional federal dollars and then returning the tax funds back to the hospitals, but it has instead turned into a true tax on hospital revenues, according to Frayne.

The legislature's website lists three bills to repeal the tax pending in the Finance Committee, and four pending in the Public Health Committee. Frayne said there are six additional bills to repeal the tax in the works in the legislature.

State Rep. J.P. Sredzinski, R-Monroe, sponsored one of the bills in the Public Health Committee. It calls for the tax to be phased out over six years.

"It's become a significant fiscal strain on hospitals," he said, adding that the jobs of many of his constituents who are employed by hospitals are being threatened by the tax.

He acknowledged that it may be difficult to eliminate a source of revenue to the state as officials are looking to close a budget deficit.

"But hospitals are struggling," he said. "It's the wrong target."

Stanley said about six corporators thus far have responded to the letter, agreeing to send letters to legislators to repeal the tax. The hospital also made its case to local lawmakers during a breakfast meeting Dec. 12.

Repeal of the tax is "a very pressing issue" for hospitals in the current legislative session, he added.

"If it's not the single most important issue for hospitals this session, it's one of the top two or three," he said.

j.benson@theday.com

Twitter: @BensonJudy

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