New Hampshire and its health systems have found an accord regarding planned changes to the state’s Medicaid provider tax, settling litigation filed by hospitals last month.
The settlement, announced Friday by Gov. Kelly Ayotte, involves planned adjustments to New Hampshire’s Medicaid Enhancement Tax (MET) that had been initiated by her predecessor Gov. Chris Sununu last year. The changes were intended to shift a larger share of state and federal funding toward community mental health and federally qualified health centers, to the detriment of hospitals that said they would collectively lose $70 million.
The MET has been in place since 1991. Similar to other provider taxes currently under scrutiny from federal agencies and lawmakers, it collects funds from healthcare organizations—in this case, exclusively acute care hospitals—that are matched by the federal government and then redistributed to New Hampshire providers through supplemental payments.
Of note, two state supreme court decisions have found requiring the tax to be unconstitutional, meaning that hospitals participate in the arrangement voluntarily and thereby have some leverage in negotiations with the state.
An agreement in place from 2017 had hospitals paying a 5.4% tax rate. In fiscal year 2024, that meant a collective $319.9 million, according to the state’s Department of Revenue Administration. This year, the MET is expected to collect $348 million of revenue from hospitals and $485 million from the federal government.
However, “punitive cuts to hospitals and the 80% distribution formula” floated by Sununu’s administration and picked up by Ayotte’s triggered pushback from the state’s hospitals. April 15, after months of negotiations, a lawsuit was filed by New Hampshire Hospital Association, Dartmouth Health and the Concord Hospital Health System.
The association, at the time, said the $70 million hospitals would lose through the proposed arrangement would “have a rippling effect” on hospitals’ ability to deliver care and “force hospitals to make decisions about the services they are able to provide.”
Dartmouth Health noted that it was particularly susceptible. The system provides 30% of the MET’s overall payments but would shoulder about three-quarters of the plan’s lost revenue. This is “largely due” to Vermont-based patients seen at its Dartmouth Hitchcock Medical Center, the patient service revenue of which adds to the center’s required MET payment but is not considered for supplemental payments.
Ayotte in April defended the “commonsense” plan, which her office said would still provide millions more to hospitals—including critical access hospitals—than in prior years while funding other types of care. She said the counterproposal from the plaintiffs “prioritized billion-dollar corporations” and described the lawsuit and messaging as “playing political games.”
In Friday’s joint statement announcing the settlement agreement, the governor said the parties’ deal was a win for the state, rural healthcare access and patients.
“I am proud of my team’s tireless efforts to reach a deal, and I thank Dartmouth Health, Concord Hospital, and the Hospital Association for coming back to the table to deliver the best possible outcome for everyone,” she said.
Each of the plaintiff organizations’ heads said the deal would ensure hospital care delivery remains financially sustainable.
“We are pleased that we were able to reach a settlement agreement with Governor Ayotte that will help strengthen the Medicaid program, support hospitals and other essential providers, and most importantly ensure continued care for the patients and communities who count on our hospitals to be there for them when they are needed most,” New Hampshire Hospital Association President Steve Ahnen said.