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Hospital Tax Deal Is Near

Hospital Tax Deal Is Near

Hartford Business Journal, Oct. 24, 2019

By Matt Pilon

State agencies and Connecticut’s hospital lobby are close to putting a deal in writing that would ease the burden of a contentious tax that has helped to close state budget gaps in recent years.

The Connecticut Hospital Association (CHA) confirmed that negotiations with the state, which have been ongoing since the announcement of a tentative deal back in May, could be completed by the end of this month.

“We have been in discussions with the state, with a mutual goal of resolving this matter so the legislature could take it up by the end of this month,” CHA said in a statement. 

Asked for comment, the Department of Social Services -- which is one of the state agencies named as a defendant in the CHA lawsuit -- would only confirm that negotiations remain ongoing. Gov. Ned Lamont’s office declined to comment on the progress of the talks.

The state’s $43 billion biennial budget delayed a previously scheduled reduction in the hospital tax.

That provided the state with approximately $183 million to help balance the two-year spending plan, which faced a multibillion-dollar deficit.  

Started in 2011 back to top

The hospital tax, which began in 2011 under former Gov. Dannel P. Malloy, was originally intended to be a mechanism for the state to leverage additional federal funds and share a portion of them with the hospitals, benefiting both sides.

But within a few years, it devolved into a financial net negative for hospitals, the CHA argued in its legal challenge of the tax, which dates back to 2015. 

In some years, the hospitals paid hundreds of millions of dollars more than they received back from the state.

In a 2016 Superior Court lawsuit that remains ongoing, CHA is arguing that the tax is unconstitutional and violates federal law.
 

If the two sides come to terms in writing, and the legislature approves the deal, that suit would be settled.

An attorney for the hospitals last week asked the judge presiding over the lawsuit to continue to postpone proceedings, as both sides continue their work to get a deal in writing.

“The parties have actively been engaged in discussions in a joint effort to commit their tentative agreement to writing, but those efforts, in combination with obtaining the necessary administrative and legislative approvals, will require additional months,” attorney Ronald W. Zdrojeski wrote.