Three Hospitals Call for Lower Energy Tax Hike

Holy Cross Hospital, Montgomery General Hospital and Suburban Hospital have sent a joint letter to the County Executive and the County Council asking for a reduced energy tax increase (which the Executive has proposed doubling) that would be levied on a temporary basis. Following is the letter.

May 5, 2010

The Honorable Isiah Leggett
Montgomery County Executive
Executive Office Building
101 Monroe Street
Second Floor
Rockville, MD 20850

The Honorable Nancy Floreen
President
Montgomery County Council
100 Maryland Avenue
Rockville, MD 20850

Dear County Executive Leggett and Council President Floreen:

On behalf of Holy Cross, Montgomery General and Suburban Hospitals, we are writing to share our serious concerns regarding the proposed 100 percent increase in the county energy tax.

At the outset, we want to emphasize that we understand and appreciate the difficult budgetary decisions you and the members of the County Council face. There are no easy decisions associated with having to close a billion dollar budget gap – particularly as the demand for services due to the economy increases. We also recognize all stakeholders need to be part of the solution.

For our hospitals, the proposed increase collectively equates to $1,200,428, broken down as follows:

Holy Cross – $560,000
Montgomery General – $298,734
Suburban – $341,694

A tax of this magnitude, on top of significant hospital Medicaid cuts and an increasing demand for services as a result of the economy, will have a material negative impact on our continued ability to provide services the residents of Montgomery County need and deserve.

Following the budget cuts contained in the state’s FY 2010 budget, hospitals were forced to absorb an additional $27.5 million in cuts taken by the Board of Public Works and $106 million in averted uncompensated care funding. This difficult situation was further exacerbated by the heavy impact of the February snowstorms. And, the FY 2011 state budget recently adopted by the General Assembly contains a further $123 million in Medicaid reductions to hospitals.

Unlike other businesses, hospitals in Maryland cannot simply pass additional costs onto our customers. As you know, the rates Maryland hospitals can legally charge are established by the Health Services Cost Review Commission. And, unlike hospitals in other states, we cannot cost-shift government underpayments and taxes to private commercial insurers. These additional costs come off the already slim and decreasing margins of our hospitals.

Unlike other energy consumers, hospitals are limited in their energy conservation options. Hospitals are 24/7 operations, very dependent on technology, and required to comply with a multitude of government regulatory requirements. Turning off lights, lowering the heat, etc. are often not viable options for us.

As not-for-profit entities, the margins hospitals generate are reinvested back into our facilities, our employees, and our communities – the exact types of reinvestments that serve to strengthen Montgomery County’s economy. In addition to the community health and wellness programs each of our hospitals provides independently to Montgomery County residents, we have partnered with the County on many occasions to further address the unmet health care needs of our communities. Examples of our support include: expanding clinics to serve the Montgomery Cares population, and funding for the recent community health needs assessment by the Urban Institute.

The energy tax proposal represents a real and significant additional cost to the hospitals in Montgomery County. As the debate moves forward, we ask that you take these factors into account and we request consideration of a lower increase in the proposed energy tax for the not-for-profit hospitals in Montgomery County. In addition, we believe it is critically important that the increase in the energy tax be sunset. Any increase in the energy tax should be a short term bridge to enable the county to continue to provide essential services during these extraordinary economic times.

Thank you for your consideration of our perspectives. We would welcome the opportunity to further discuss with you the issues and implications for our hospitals.

Sincerely,

Kevin J. Sexton
President
Holy Cross Hospital

Peter W. Monge
President
Montgomery General Hospital

Brian A. Gragnolati
President
Suburban Hospital