‘Bed tax’ termed a major threat to expansion plans
By: David Campbell
A line item in Gov. Jon Corzine’s March 21 budget address aimed at capturing matching federal health-care funds through a tax on every licensed hospital bed in the state could jeopardize Princeton HealthCare System’s planned relocation to Plainsboro, Pam Hersh, PHCS’s vice president of government and community affairs, said Monday.
"The tax would put the viability of the hospital and the plans for expansion at risk," Ms. Hersh said.
By doing so, she continued, the proposed hospital tax referred to as the "sick" or "bed" tax would "deprive the region of the best possible healthcare in an exciting, state of the art teaching and healing facility, as well as deprive the region of a powerful economic development initiative."
Gov. Corzine has proposed a tax on every licensed hospital bed in the state to raise an anticipated $430 million annually. The state has determined that there are 25,143 licensed beds in the New Jersey. This translates into about $1,424 a bed per month, or roughly $50 a day per bed.
Under the plan, half the money raised would be put into the state general fund for general purposes while the remainder would be applied to bringing in federal matching funds for hospitals statewide.The stated intent of the proposed bed tax is to maximize federal matching dollars about $215 million that would in turn flow into the state’s health-care system.
Under the proposal, the total taxed amount of $430 million would be returned to hospitals in the form of two pools $316 million via increased Medicaid fee-for-service DRG payment rates, and $114 million Medicaid HMO payments.
But according to Betsy Ryan, chief operating officer with New Jersey Hospital Association, the redistribution plan as proposed by the governor would create "enormous numbers of losers."
Ms. Ryan said that about 49 hospitals in the state including the PHCS-owned University Medical Center at Princeton on Witherspoon Street would end up losing roughly $4.5 million a year. Ms. Hersh said some hospitals could pay out up to $6 million annually.
In addition, she said the proposed tax would need the approval of the federal Centers for Medicare and Medicaid Services, but said the Bush administration is intent on slashing such programs.
Ms. Ryan said NJHA is talking with legislators and asking hospitals to do the same to let them know that "this scheme to rob Peter to pay Paul is not feasible" and could result in hospital closures and layoffs.
PHCS is selling its UMCP campus as part of its planned relocation to Plainsboro. The health-care system is buying 160 acres owned by FMC Corp. at Route 1 and Plainsboro Road to build a new $350 million hospital campus.
In 2005, UMCP operated on a 0.9-percent operating margin, at a profit of $1.6 million, Ms. Hersh said.
"This is a profit that we have worked very hard to generate it has taken four years of cuts and efficiencies to get here," she said.
She said the proposed tax would wipe out the margin entirely, and would amount to a roughly $4.5 million annual loss for UMCP.
Ms. Hersh said the bed tax would make it "financially impossible" for PHCS to borrow money for its $350 million hospital project.

