Hospital Association Files Lawsuit Over Deep Health Care Cuts

Legislature's decision to raid the Hospital Safety Net Account is unconstitutional and will devastate hospitals and the patients they serve.

SEATTLE, July 18, 2011/PRNewswire-USNewswire/ -- The Washington State Hospital Association (WSHA) announced today it has filed a lawsuit against the State of Washington to overturn legislation that diverts money to the state general fund from an account set up to pay for hospital services to the poor and vulnerable. The account is 100 percent funded by a state tax on hospitals.  As a result, the state will lose $110 million in federal funding available to pay for Medicaid hospital services.

The lawsuit, filed in King County Superior Court, asks the court to order the funds in the account be restored and used for their intended purpose of preserving vital hospital services for low-income Medicaid patients and children on Apple Health across the state.

"We are going to court reluctantly. In 2010 our state's hospitals voluntarily agreed to tax themselves to maintain our health care system. The tax was substantial – more than a quarter of a billion dollars in the last biennium. Now the state diverted that money and is using it for purposes that were never intended," said Scott Bond, president and chief executive officer of WSHA. "The legislature is violating an agreement we reached only one year ago. The consequences to the health care system are very serious, and we are confident this misguided and unconstitutional action will be reversed by the courts."

On June 15, Governor Gregoire signed House Bill 2069 into law.  The effect of the legislation is to divert money out of the Hospital Safety Net Account and into the General Fund. This diversion results in a reduction of state and federal funding for hospitals of $260 million.

"In 2010, Washington hospitals came to the legislature with an innovative idea that prevented deep cuts to the hospital safety net," continued Bond.  "The legislature's decision to divert these funds, on top of the cuts to the Basic Health Plan, community health clinics, and mental health services will have a direct impact on the people of Washington State."

The lawsuit focuses on two issues. It argues that by using funds for purposes other than supporting hospital payments, as was originally intended; the state has violated Article VII, Section 5 of the Washington State Constitution.  This section states "No tax shall be levied except in pursuance of law; and every law imposing a tax shall state distinctly the object of the same to which only it shall be applied." Meaning a tax can only be used for the purpose it was collected to fund.

WSHA contends the legislature's decision to raid the account violates provisions of the assessment law, enacted in 2010, which requires the state to continue its previous level of funding needed to maintain hospital inpatient and outpatient reimbursement rates.

About the Hospital Safety Net Assessment

In 2009, Washington State faced a $9 billion budget gap – part of closing that gap was to make deep cuts to health care, including $311 million in direct cuts to hospitals.

WSHA approached the legislature with an innovative idea to restore Medicaid payments to hospitals and provide some money for the state's general fund. The Hospital Safety Net Assessment, House Bill 2956, was enacted in 2010.

The money collected through the assessment serves as the state's share of funding used to bring in federal matching funds. Assessment funds and the federal matching funds are returned to hospitals through higher Medicaid rates.  A small portion, roughly $50 million per biennium, went to the state general fund. For the 2009-2011 biennium, the assessment is scheduled to provide more than $100 million to hospitals, helping to partially restore the 2009 budget cuts and preserve services for Medicaid and Apple Health enrollees.  

The hospitals' deal with the legislature did not last long.  Just a year into the program, as it was beginning to produce results for hospitals and the state, the legislature turned its back on the agreement by enacting House Bill 2069. The legislation amends the state law that established the assessment and:

• Cut hospital Medicaid payments significantly
• Raided $110 million for state general funds
• Lost $110 million in Medicaid match funds for hospital payments
• Kept $40 million in surplus funds
• Total impact is a cut of $260 million

Under House Bill 2069, prospective payment hospitals  pay out more than they receive.  Under the new law, prospective payment system hospitals will not even get back the amount of money paid into the system, on average, hospitals receive 80 cents for every $1 they pay in.  Critical access, psychiatric, and large public hospitals are not impacted by these cuts.

About WSHA

WSHA is a membership organization representing 97 community hospitals across the state. The association advocates on behalf of its member hospitals WSHA works to improve the health of the people of the state by becoming involved in all matters affecting the delivery, quality, accessibility, affordability and continuity of health care.

SOURCE Washington State Hospital Association