Just as Wyoming is starting to attract new health care providers, such as a physician-owned hospital in Casper, the state is considering one bill to keep health entrepreneurs out.

Nonprofit hospitals in Wyoming already enjoy competitive advantages over for-profit hospitals such as property and sales taxes exemptions, but Wyoming’s Joint Labor, Health and Social Services Interim Committee wants to give these nonprofits yet another benefit – access to a hospital fee (government-speak for tax) slush fund. Disguised as a way to fund charity care, the committee is proposing a tax as high as 30 percent on hospital revenues. This will further increase the cost of healthcare, discourage new private hospital construction and limit patient choice.

The draft bill, 14LSO-0142, would tax hospitals serving patients who pay with their own money or with private insurance for redistribution to hospitals serving Medicaid and Medicare patients. This scheme will increase the cost of health care by forcing for-profit hospitals to increase the cost of their service. Nonprofit hospitals will have no incentive to find cost efficiencies as funds move from private, revenue-generating hospitals to net-losing hospitals.

Labeling this bill “charity-care equalization” is nothing more than a deceitful move to fool people into believing for-profit hospitals eschew charity care. However, according to a 2006 Congressional Budget Office study, for-profit hospitals provide almost as much and sometimes more charity care than nonprofit hospitals.

Wyoming’s proposed “equalization” bill is really a regressive tax against health entrepreneurs in the state. How big a tax hospitals must pay depends on how much revenue a hospital receives from Medicaid and/or Medicare. Those hospitals serving no Medicaid or Medicare patients would pay a tax of some 30 percent against its total revenue. As hospitals agree to see more Medicaid or Medicare patients, that tax falls.

Tax Schedule
Hospital Tax Table

The proposed bill offers ways for hospitals to reduce these oppressive taxes, but no matter what they do, they can’t reduce the tax payable by more than one-third.

The tax revenue will prop up net-losing hospitals. Hospitals receiving more than 20 percent of revenue from Medicaid or Medicare may siphon funds from the slush fund. The distribution from makers to takers is a percentage of the balance in the slush fund equal to the hospital’s proportionate share of all Medicare and/or Medicaid revenue.

Nonprofit hospitals in Wyoming already have a leg up on their competitors, and this bill renders the hospital marketplace less competitive by punishing and perhaps discouraging revenue-generating hospitals. This could limit new hospital construction, diminish price competition and reduce health care choice in Wyoming. The last thing Wyoming’s legislature should do is prop up unsuccessful business models in the guise of protecting our most vulnerable citizens.