Attorney General's Opinion
Attorney General, Richard Blumenthal
March 27, 1996
Reginald L. Jones, Jr.
Secretary
Office of Policy and Management
80 Washington Street
Hartford, Connecticut 06106
Dear Secretary Jones:
You have requested the opinion and advice of the Attorney General regarding the status of the above-entitled case, and the alternatives that are available for the disbursement of funds that will be received by the state following its resolution. It is our opinion that the anticipated collections should be deposited in the special account in the General Fund established by the Commissioner of Social Services, pursuant to sections 56 and 62 of Public Act 95-160. The funds should then be utilized for purposes consistent with the terms of the Uncompensated Care Pool Act (hereinafter the "Act"), specifically, Conn. Gen. Stat. § 19a-168b, including being redistributed to hospitals to the extent that these monies are not utilized for other permitted purposes.
STATUTORY BACKGROUND AND HISTORY OF THE CASE
New England Health is an action brought by a certified class of individual participants and beneficiaries, a union that represents employees of health care facilities, and a multi-employer health care plan (hereinafter the "Plan"). The plaintiffs claim that the statutory assessments on hospital services that were utilized to fund the former Uncompensated Care Pool (hereinafter the "Pool") are invalid because the statute is preempted by a provision of the Employee Retirement Income Security Act of 1974 (hereinafter "ERISA"), 29 U.S.C. § 1144. The State of Connecticut, acting through the Chairman of the former Commission on Hospitals and Health Care (the "Commission"),1 and all Connecticut hospitals, acting through the Connecticut Hospital Association, are defendants in the action. The State recently prevailed in its appeal from the adverse Judgment of the District Court, and it is anticipated that Connecticut hospitals will collect the outstanding, unpaid assessments and pay these assessments to the State in accordance with the terms of the Act. Conn. Gen. Stat. §§ 19a-168b, and 19a-168s,2 as amended by Public Act 95-160.
The Pool was originally established by Public Act 91-2 in order to more fairly distribute the cost of providing uncompensated care among Connecticut's hospitals, and to obtain additional federal financial participation (hereinafter "FFP") under the Title XIX Medicaid Program. The Act provided for the Pool to be funded by assessments on hospital services, Conn. Gen. Stat. §§ 19a-168b (b) and (c), and for the resulting Pool revenues to be redistributed back to hospitals in proportion to the uncompensated care provided by each hospital. Conn. Gen. Stat. §§ 19a-168b (d) and (e).3 Pool payments to hospitals qualified for FFP because they were considered to be Medicaid disproportionate share hospital payments (hereinafter "DSH payments") "to the extent allowable under federal law." Conn. Gen. Stat. § 19a-168b(d)(1).4 See 42 U.S.C. § 1396r-4 for the federal law provisions applicable to state DSH payments to hospitals.5
The case was filed on December 11, 1992 in the United States District Court for the District of Connecticut. The Plan and the Connecticut Hospital Association entered into an escrow agreement on August 19, 1993, pending resolution of the action in an effort to avert hospital collection actions against individual plan beneficiaries for unpaid charges. Prior to the agreement, the Plan represented that it had been escrowing 30.5% of hospital charges in lieu of paying this percentage on behalf of Plan beneficiaries as Plan benefits. The Plan agreed to prospectively reduce the escrowed amount to 8.4% of charges. The Plan agreed to maintain these escrowed payments in a separate account, pending the resolution of the action. In return, the hospitals agreed to forebear bringing collection actions against Plan beneficiaries for unpaid charges pending the outcome of the action.
The District Court granted summary judgment in favor of the plaintiffs on February 25, 1994, and entered injunctive relief requiring hospitals to forbear future collection activities related to amounts attributable to the Pool and to refund amounts previously collected that were attributable to assessments. 846 F. Supp. 190 (D. Conn. 1994). The Legislature responded to the decision of the District Court by terminating the Pool. See Public Act 94-9, entitled "An Act Terminating the Uncompensated Care Pool."6
Specifically, section 3 of Public Act 94-9, codified at Conn. Gen. Stat. § 19a-168v, provides as follows: "The Uncompensated Care Pool shall terminate effective 12:00 a.m., April 1, 1994." However, the 1994 Act terminating the Pool specifically does not "impair or affect any ... right accruing, accrued or acquired, or any obligation, liability ... under Chapter 368c of the general statutes." Conn. Gen. Stat. § 19a-168v, as amended by section 3 of Public Act 94-9. Public Act 94-9 further provided that, notwithstanding the termination of the Pool, "[d]uring the period April 1, 1994, to April 12, 1994, inclusive, revenues received and payments made from said pool, shall be made in accordance with the provisions of section 19a-168b." Conn. Gen. Stat. § 19a-168v(b), codifying section 3 of Public Act 94-9. Finally, section 4 of the Public Act 94-9 authorized the Commission to maintain its contract with a private entity for the purpose of providing assistance "to deactivate, audit or consult on any rights, duties or obligations owed to the uncompensated care pool prior to April 1, 1994 ..." Conn. Gen. Stat. § 19a-168w.
One year later, the legislature directed that "final settlement" of the Pool be made no later than June 15, 1995. Specifically, Conn. Gen. Stat. § 19a-168v(c)(1), codifying section 56 of Public Act 95-160, provides, in pertinent part, that:
(c) (1) Final settlement of all obligations and liabilities of the uncompensated care pool shall be no later than June 15, 1995. All uncompensated care pool assessments and other liabilities of hospitals for the period ending March 31, 1994, based on the assessable accounts receivable as of March 31, 1994, shall be made no later than June 15, 1995. The amount, if any, by which assessments and other liabilities exceed payments shall be credited to the resources of the general fund.
The legislature, however, deliberately exempted the anticipated payments from hospitals attributable to the New England Health plaintiffs from the "finality" of any settlement of the Pool. The balance of Conn. Gen. Stat. § 19a-168v(c), codifying section 56 of Public Act 95-160 provides, in subpart (2), that:
(c) (2) Following the final resolution of an action pending in the United States District Court for the District of Connecticut entitled New England Health Care Union, District 1199, SEIU, AFL-CIO; et al v. Mt. Sinai Hospital et al, No. 92-CU-1012, any additional amounts owed to the state from hospitals as a result of payments that the hospitals are entitled to receive for patient care services following the resolution of such action shall be due and payable to the state no later than one month following receipt of such payments by the hospital. Such amount shall be deposited into the general fund and credited to the reconciliation account established pursuant to section 62 of this Act.
Section 62 of Public Act 95-160 provides as follows:
There is established a reconciliation account which shall be a separate, nonlapsing account within the general fund. Any moneys received pursuant to subdivision (2) of subsection (c) of section 19a-168v of the general statutes, as amended by section 56 of this act, shall be deposited by the commissioner of social services into the account.
The Court of Appeals for the Second Circuit reversed the Judgment of the District Court by decision dated September 11, 1995, 65 F.3d 1024 (2d Cir. 1995), and remanded the action to the District Court with directions for the District Court to enter Judgment in favor of the State and hospital defendants. The order of remand further required the District Court to enter an order requiring the plaintiffs to pay Connecticut hospitals the amounts that were improperly withheld, and the amounts that were erroneously ordered to be refunded to the Plan as a result of the Judgment of the District Court.
The District Court entered an Order on February 1, 1996, directing the Clerk to enter a Judgment in favor of the State and hospital defendants. The Order further requires the parties to confer and to propose a supplemental order concerning the obligation of the plaintiffs to pay unpaid hospital charges. The parties have conferred and have reached agreement on the amount that will be paid by the Plan, on behalf of Plan beneficiaries, to each Connecticut hospital. A copy of the agreement is attached hereto as Exhibit A.
ANALYSIS
- The State Must Collect Payments Due From Hospitals and
Utilize the Funds In Accordance With the Act.
Notwithstanding that the Pool was terminated effective April 1, 1994 by Public Act 94-9, it is clear that hospitals remain liable to submit monies due and owing to the Pool for services provided prior to April 1, 1994 related to services provided to Plan beneficiaries. Furthermore, the "final settlement" of the Pool required by Public Act 95-160 does not excuse hospitals from their obligation to remit the assessment to the State. Section 56 of Public Act 95-160 requires the anticipated collections to be submitted to the State within thirty days of their receipt by hospitals.
At first glance, there appears to be some ambiguity in the statute regarding how these anticipated revenues should be processed by the responsible state officials. Sections 56 and 62 of Public Act 95-160 require these monies to be credited to a special reconciliation account within the General Fund, but do not provide specific directions about how the funds must subsequently be applied. We have determined that legislative direction on the use of these funds is provided by other provisions in the statute, which must be given effect and which control the application of these funds.
Specifically, as noted supra, Public Act 94-9, expressly does "not impair or affect any ... right occurring, accrued or acquired, or any obligation, liability ... incurred prior to April 1, 1994, under Chapter 368c of the general statutes ... and the same may be enjoyed, asserted and enforced, as fully and to the same extent and in the same manner as they might under the laws existing prior to said date ..." Conn. Gen. Stat. § 19a-168v(a). Both the obligation of hospitals to remit assessments to the State for Pool purposes, and the corresponding obligation of the state officials to utilize Pool monies for specified Pool purposes, are contained in Chapter 368c of the General Statutes. See Conn. Gen. Stat. §§ 19a-168b (as to the assessment factors for all periods of time prior to October 1, 1993, and as to the uses of Pool monies, including the applicable redistribution formula for all periods of Pool operation) and 19a-168s (as to the assessment factors for fiscal year commencing October 1, 1993). Accordingly, as a result of the preservation of the rights and liabilities accruing to and from the Pool by Conn. Gen. Stat. § 19a-168v(a), the applicable state officials are required to apply monies attributable to the Pool in accordance with the provisions of Conn. Gen. Stat. § 19a-168b.
The subsequent statutory direction of section 56 of Public Act 95-160 to make final settlement of the Pool does not change this analysis for two related reasons. First, the legislature did not repeal or amend the statute preserving the rights and liabilities of the hospitals relating to the Pool, Conn. Gen. Stat. § 19a-168v(a), even though Public Act 95-160 was designed, in part, to implement "final settlement" of the Pool. Second, the legislature specifically exempted this anticipated revenue from the final settlement and required the funds to be deposited in a special "reconciliation" account in the General Fund. Under accepted rules of statutory construction, each of these sections of the statutes must be read harmoniously and be given full effect, if at all possible. State v. Kozlowski, 199 Conn. 667, 509 A.2d 20 (1986); Berger v. Tonken, 192 Conn. 581, 473 A.2d 782 (1984). These statutory provisions may each be given full effect only if the funds deposited in the special reconciliation account are utilized in accordance with the statutory provisions controlling the application of Pool monies. Conn. Gen. Stat. §§ 19a-168v and 19a-168b.7 Accordingly, it is our opinion that the funds received from hospitals must be deposited in the special reconciliation account in the General Fund, created pursuant to sections 56 and 62 of Public Act 94-9, and then be utilized for purposes consistent with the Act.
- Implementation of Assessment and Redistribution.
Having determined that the amounts remitted to the State should first be deposited in the special reconciliation account in the General Fund established pursuant to sections 56 and 62 of Public Act 95-160, and then utilized for Pool Act purposes, a number of other issues need to be resolved. These are as follows: (A) Which portion of the revenues to be realized by hospitals will be subject to the assessments? (B) What assessment factors should be applied to the revenues realized by the hospitals and what formula should be applied in redistributing the monies back to Connecticut hospitals?
- Portion of Revenue Now Subject to Assessment.
The Plan and the hospitals report that they have reviewed their records and have negotiated agreed amounts that will be paid by the Plan (on behalf of Plan beneficiaries) to each Connecticut hospital. The stipulation provides for the payment of an aggregate total of approximately 2.5 million dollars by the Plan to the hospitals.
For purposes of determining the hospitals' obligation to remit monies to the State, the amount due to Connecticut hospitals by the Plan must be further broken down into two categories: 1) "uncompensated care" amounts that were paid by the Plan to Connecticut hospitals, pursuant to the terms of the Escrow Agreement (i.e., difference between 30.5% and 8.4% of charges), which were then refunded by hospitals to the Plan after the entry of Judgment by the District Court; and 2) amounts that were never paid by the Plan to hospitals on behalf of Plan beneficiaries (i.e., 30.5% of charges for services provided prior to the effective date of the escrow agreement, and 8.4% of charges for services provided thereafter).
Assuming that the representations of the hospitals are correct, no money is due to the State for Plan payments that were previously made to hospitals but which were refunded by hospitals to the Plan pursuant to the terms of the District Court's Judgment. The hospitals were instructed to, and presumably did, pay the assessments to the Pool at the time the revenues were collected. The hospitals report that no downward adjustment was made to their reported revenues as a result of their payments to the Plan following the entry of the Judgment of the District Court, and that no adjustment was made at the time of "final settlement." As a result, assuming the hospitals are correct, the assessments have already been paid to the State on those revenues that were previously received by the State and then paid back to the Plan.
However, hospitals have not paid to the State assessments on patient care services which were withheld and never paid by the Plan (including the 30.5% of charges withheld prior to the execution of the escrow agreement, and the 8.4% of charges withheld subsequently) since the hospitals have never previously "realized" those revenues. Attached hereto as Exhibit B is a chart summarizing information reported by both the hospitals and the Plan, which states in Column C the amount of "new revenue" that will be realized by hospitals for the first time and will be subject to the Act's pooling mechanism in accordance with this opinion. This amount is approximately 1.3 million dollars.8
- Assessment Factors And Redistributive Formulas To Be Employed To Anticipated New England Care Revenues.
The determination of which assessment factor should be applied to hospitals' anticipated revenues, and which redistributive formula should be applied to these revenues once received by the State (to the extent that these revenues are not utilized for other permitted purposes) is incapable of being answered in a manner that is not free from ambiguity. The anticipated revenues represent payment for outstanding hospital charges for services that were provided at various points in time during the life of the Pool. As noted supra, fn. 2 and 3, both the assessment factors and the redistributive formulas were amended numerous times during the Pool's short life. Consequently, the question becomes which assessment factor, and which redistributive formula, should be applied to these revenues?9
The Commission reports that the Pool was always operated on a "cash basis," i.e., that hospitals were required to submit to the Pool the percentage of revenues that was operative on the date of receipt of the revenue, not on the date the service was provided. Similarly, the Commission reports that it always employed the redistributive formula that was applicable on the date that the revenues were received from Connecticut hospitals, and not the redistributive formula that may have been applicable on the date service was provided. The interpretation of the administering state agency on this question is entitled to deference. Griffin Hospital v. Commission on Hospitals and Health Care, 200 Conn. 489, 512 A.2d 199 (1986). Accordingly, instead of requiring hospitals to document the dates of service attributable to this new revenue, and applying the applicable percentage to each date of service, it is reasonable and consistent with the Commission's prior administrative practice for the Commission to apply the most recent (and final) assessment factors to this new revenue. Similarly, it would be reasonable and consistent with its long-standing administrative practice for the Commission to redistribute these revenues among all Connecticut hospitals according to the most recent (and final) redistribution formula.10 In light of the clear legislative direction that these anticipated revenues should be treated in accordance with the Act, and in light of this Commission's historic administrative practice, this appears to be the best option available to the Commission in that it best harmonizes the various statutory provisions.11
- Portion of Revenue Now Subject to Assessment.
CONCLUSION
It is our opinion that Connecticut hospitals are required to pay Pool assessments on the revenue that they receive as a result of the resolution of the New England Health case, that the assessments should be deposited in the General Fund and credited to the special account established pursuant to Public Act 95-160, and that the revenues should then be utilized consistently with the purposes of the Act. Conn. Gen. Stat. 19a-168b. The Commission may reasonably apply the most recent assessment factor and expect Connecticut hospitals to remit 22.5001% of the amount listed in Column C of Exhibit B (based on the hospitals own calculations) to be submitted to the State. §§ 19a-168b(e)(5).12 These funds should then be distributed back to hospitals in accordance with the most recent statutory distribution formula, modified to the extent necessary to ensure that the Pool is "revenue neutral," to the extent that these funds have not been utilized for other permitted Pool Act purposes.
Very truly yours,
Richard Blumenthal
Attorney General
Hugh Barber
Assistant Attorney General
RB:HB:dsw
cc: Joyce Thomas, Commissioner DSS
William Diamond, OHCA
AGREEMENT
WHEREAS, New England Health Care Employees Union Dist. 1199 v. Mount Sinai Hosp., 846 F. Supp. 190 (D. Conn. 1994) (JAC), held that Connecticut's Uncompensated Care Pool Act, Conn.Gen. Stat. §19a-168 et seq., as amended (the "UCP Act"), was preempted by the Employees Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §1001 et seq., and ordered that neither the New England Health Care Employees Health Fund (the "Health Fund"), nor its covered beneficiaries were to be held financially responsible for that portion of any Connecticut hospital bills incurred by beneficiaries between July 8, 1992 and April 1, 1994 that was attributable to either (a) the assessment and sales tax imposed under the UCP Act, or (b) the "cost-shift" built into each hospital's charges to cover the remaining costs of providing uncompensated and undercompensated care to hospital patients; and
WHEREAS, in the summer and fall of 1994 each hospital in the State paid to the Health Fund and, in some cases, individual Health Fund beneficiaries, certain sums of money, pursuant to the terms of the Order of the District Court in New England Health Care Employees Union (the "February 25, 1994 Order"); and
WHEREAS, on September 11, 1995, the Court of Appeals for the Second Circuit reversed the judgment of the District Court in New England Health Care Employees Union, and, on remand, directed the Court "to enter an appropriate order regarding any payments that should have been made under the [UCP] Act"; and
WHEREAS, the hospitals claim that they have a right to restitution of what they lost by the enforcement of the February 25, 1994 Order, which has now been reversed, and to certain other payments for services rendered to Health Fund beneficiaries; and
WHEREAS, although the Health Fund, the Union and Nina Milner (as an individual and on behalf of the class consisting of Health Fund beneficiaries) do not necessarily concede the claims of the hospitals, the parties hereto have concluded that it is in their mutual interest to resolve all claims by mutual agreement;
THEREFORE, IT IS HEREBY AGREED THAT:
1. In consideration of this Agreement (and the payments and releases described below) the parties to this Agreement waive and release any and all claims between and among themselves and the hospitals relating to
(i) bills for hospital services provided to Health Fund beneficiaries that were both (a) processed by the Health Fund on or after July 8, 1992, and (b) for services rendered on or before March 31, 1994; and
(ii) restitution of amounts paid by the hospitals to the Fund and to individual Fund beneficiaries pursuant to the February 25, 1994 Order.
2. Within five business days after the receipt by the Fund of a release as described in paragraph 3, below, the Fund shall remit to each hospital that has executed such a release, respectively, the amount for such hospital shown on the schedule attached hereto as Exhibit A.
3. In consideration for the payment described in paragraph 2, above, each hospital shall execute a release, in the form of Exhibit B, attached hereto.
4. This Agreement may be executed in one or more counterparts, each one of which shall be an original, which together shall constitute one and the same document.
IN WITNESS WHEREOF, the undersigned have set their hand as of the 25th day of January, 1996.
MOUNT SINAI HOSPITAL AND THE CONNECTICUT HOSPITAL ASSOCIATION
By
William J. Doyle
Karen L. Clute
Wiggin & Dana
NEW ENGLAND HEALTH CARE EMPLOYEES UNION, DISTRICT 1199 HEALTH FUND
By
John M. Creane, Esq.
Michael E. Passero, Esq.
Law Firm of John M. Creane
NEW ENGLAND HEALTH CARE EMPLOYEES UNION, DISTRICT 1199 and NINA MILNER, individually and on behalf of the class
By
Daniel Livingston, Esq.
Susan Price-Livingston, Esq.
Gould, Livingston, Adler & Pulda
EXHIBIT A
HOSPITAL PAYMENT AMOUNT
Backus $ 31,139.84
Bradley 4,389.65
Bridgeport 72,891.98
Bristol 944.37
CT Children's 13,377.11
Danbury 68,388.80
Day Kimball 82,276.26
John Dempsey 9,243.00
Greenwich 0.00
Griffin 33,358.95
Hartford 218,611.89
Charlotte Hungerford 81,834.62
Johnson 8,505.94
Lawrence & Memorial 74,364.26
Manchester 89,798.43
Middlesex 16,007.03
Milford 32,681.00
Mount Sinai 265,362.16
New Britain General 31,780.91
New Milford 22,931.29
Norwalk 75,477.67
Park City 3,921.00
Rockville General 27,049.16
St. Francis 195,207.31
St. Joseph 3,214.40
St. Mary's 114,295.17
St. Raphael 158,746.74
St. Vincents 86,621.63
Sharon 3,494.57
Stamford 34,667.97
Veteran's Memorial 35,145.64
Waterbury 320,784.51
Windham 44,641.50
Winsted 26,266.83
Yale 212,578.42
TOTAL $2,500,000.00
EXHIBIT B
| A. | B. | C. | |
| HOSPITAL | AMOUNT TO BE PAID BY PLAN ON RESOLUTION OF ACTION |
AMOUNTS PREVIOUSLY PAID TO HOSPITALS AND RETURNED TO PLAN FOLLOWING THE JUDGMENT OF THE DISTRICT COURT |
NEW REVENUE TO HOSPITALS NOT PREVIOUSLY RECEIVED AND SUBJECTS TO ASSESSMENTS |
| Backus | $ 31,139.84 | $ 17,673.76 | $ 13,466.08 |
| Bradley Memorial | $ 4,389.65 | $ 3,223.83 | $ 1,165.82 |
| Bridgeport | $ 72,891.98 | $ 31,410.27 | $ 41,481.71 |
| Bristo | $ 44.37 | $ 379.07 | $ 565.30 |
| CT. Children's | $ 13,377.11 | $ 0.00 | $ 13,377.11 |
| Danbury | $ 68,388.80 | $ 26,258.31 | $ 42,130.49 |
| Day Kimball | $ 82,276.26 | $ 30,692.00 | $ 51,584.26 |
| Greenwich | $ 0.00 | $ 0.00 | $ 0.00 |
| Griffin | $ 33,358.95 | $ 20,360.02 | $ 12,998.93 |
| Hartford | $218,611.89 | $100,251.81 | $118,360.08 |
| C. Hungerford | $ 81,834.62 | $ 42,533.56 | $ 39,301.06 |
| John Dempsey | $ 9,243.00 | $ 9,243.00 | $ 0.00 |
| Johnson | $ 8,505.94 | $ 5,661.29 | $ 2,838.65 |
| Lawrence & Memorial | $ 74,364.26 | $ 40,284.47 | $ 34,079.79 |
| Manchester Memorial | $ 89,798.43 | $ 43,614.09 | $ 46,184.34 |
| Middlesex | $ 16,007.03 | $ 11,104.52 | $ 4,902.51 |
| Milford | $ 32,681.00 | $ 13,543.29 | $ 19,137.71 |
| Mount Sinai | $ 265,362.16 | $ 134,466.36 | $ 130,895.80 |
| New Britain General | $ 31,780.91 | $ 17,879.16 | $ 13,901.75 |
| New Milford | $ 22,931.29 | $ 17,372.18 | $ 5,559.11 |
| Newington | $ ----------- | $ 8,946.49 | $ -8,946.49 |
| Norwalk | $ 75,477.67 | $ 14,647.98 | $ 60,829.69 |
| Park City | $ 3,921.00 | $ 3,921.31 | $ -.31 |
| Rockville General | $ 27,049.16 | $ 6,260.82 | $ 20,788.34 |
| St. Francis | $ 195,207.31 | $ 74,584.99 | $120,622.32 |
| St. Joseph | $ 3,214.40 | $ 1,983.30 | $ 1,231.10 |
| St. Mary's | $ 114,295.17 | $ 55,781.36 | $ 58,513.81 |
| St. Raphael | $ 158,746.74 | $ 72,086.63 | $ 86,660.11 |
| St. Vincents | $ 86,621.63 | $ 19,761.34 | $ 66,860.29 |
| Sharon | $ 3,494.57 | $ 888.57 | $ 2,606.00 |
| Stamford | $ 34,667.97 | $ 6,523.01 | $ 28,144.96 |
| Veteran's Memorial | $ 35,145.64 | $ 15,843.54 | $ 19,302.10 |
| Waterbury | $ 320,784.51 | $ 164,191.16 | $156,593.35 |
| Windham | $ 44,641.50 | $ 22,489.19 | $ 22,152.31 |
| Winsted | $ 26,266.83 | $ 10,104.29 | $ 16,162.54 |
| Yale | $ 212,578.42 | $ 128,519.94 | $ 84,058.48 |
| TOTALS | $2,500,000.01 | $1,172,484.91 | $1,327,509.10 |
1 The Commission's functions were transferred to the Office of Health Care Access by Public Act 95-257. Since the former Commission was charged with the administration of the Pool Act, and the applicable statutes refer to the Commission, for reasons of simplicity and clarity, we will continue to refer to the Commission in describing the governmental entity that is charged with the administration of the Pool Act.
2 The statute that sets the assessment factors for the fiscal year commencing October 1, 1993, is separately codified at Conn. Gen. Stat. § 19a-168s. The assessment factors applicable to prior years are codified at Conn. Gen. Stat. § 19a-168b.
3 The Pool was originally funded by a 30.7% assessment that was required to be separately itemized on each patient's bill for hospital services. Public Act 91-2. Effective October 1, 1992, the assessment on patient care services was reduced to 8.4 percent. May Sp. Sess. Public Act 92-16. Public Act 93-44 then split the 8.4% assessment into two parts: a 6% sales tax, and a 2.6% assessment on patient charges. Effective June 4, 1993, the legislature substituted a 2.4% assessment on each hospital based upon its aggregate gross revenues for the 2.4% assessment on patient charges. The 6% sales tax was retained. Public Act 93-44. The amount of the assessment on hospitals was subsequently increased to 16.5001 percent of aggregate gross revenue as a result of the statutory changes made by Public Act 93-229. The sales tax remained at 6%.
4 The formula that was applied to Pool revenues in redistributing the revenues back to hospitals was also varied several times over the life of the Pool by statutory amendments which gave varying directions with respect to the extent to which each type of uncompensated care was to be considered in determining there distributive formula. See Conn. Gen. Stat. § 19a-168b(e)(1)-(5) for the redistributive formulas that were prescribed for various periods of time commencing with the beginning of the Pool, and ending with fiscal year 1994 (during which year the Pool was terminated).
5 An upper limit of the amount of FFP that may be provided to a state related to DSH payments is imposed in the federal Medicaid statute. 42 U.S.C. § 1396r-4(f). This provision limits the extent to which the redistributive Pool payment to hospitals may qualify for FFP. The extent to which FFP may be available, however, does not limit the amount of funds that must be paid into the Pool by the hospitals, or to be redistributed back to hospitals as Pool disbursements under state law. State statute provides for the statutory assessment to be included on each patient's bill, (and later, for the assessments to be paid by each hospital, based upon its aggregate hospital revenue). Conn. Gen. Stat. § 19a-168b. The statute further provides for all Pool monies to be disbursed according to a statutory formula. Id. The statute also provides for Pool disbursement to qualify for FFP as Medicaid DSH payments "to the extent allowable under federal law." Conn. Gen. Stat. § 19a-168b(d)(1). No authority is afforded to the administering state officials to vary state statutory requirements by exempting a portion of hospital charges or revenues from being contributed to the Pool, or by limiting the amount of disbursements to be made from the Pool, out of consideration of the cap in federal Medicaid law on the amount of DSH payments that can qualify for FFP.
6 In lieu thereof, the legislature substituted a tax and expenditure system that had many of the attributes of the former Pool system, but made several changes to the statutory Pool system in response to the District Court decision in New England Health. The amended statutes continued to provide for the imposition of a sales tax on hospital services, Conn. Gen. Stat. § 12-407 et. seq., as amended by sections 14-20 of Public Act 94-9, and a provider tax on hospitals based upon aggregate annual revenues, Conn. Gen. Stat. § 12-263a et seq., codifying sections 21-25 of Public Act 94-9. However, these taxes were now deposited in the state's General Fund. Furthermore, Medicaid DSH payments were now made by the Department of Social Services based upon the amount of uncompensated care provided by each hospital and the amount appropriated by the legislature for that purpose. Public Act 94-9, Sections 5-7. This amended statutory system was ultimately upheld on ERISA grounds by the Second Circuit in Connecticut Hospital Association v. Weltman, 66 F.3d 413 (2d Cir. 1995).
Notwithstanding its similarities to the former Pool system, the New England Health plaintiffs did not challenge the amended system established by Public Act 94-9. We presume that Plan beneficiaries have met their payment obligations under the amended statute. Accordingly, this opinion addresses only the consequences of the Second Circuit's reversal of the District Court's Judgment in New England Health upon the payment obligation of the Plan beneficiaries (or the Plan on behalf of its beneficiaries), and the manner in which the anticipated collections should be handled by the State once hospitals make the anticipated collections and transmit same to the State in accordance with state law.
7 Since the legislature contemplated that the Pool's accounts would be closed on or about June 15, 1995, by "final settlement," it was necessary for the legislature to provide alternative direction concerning where the anticipated New England Health monies would be deposited. Otherwise, these funds would have been deposited in the General Fund and commingled with all other state General Fund dollars. The fact that the legislature required these funds to be credited to a special account in the General Fund, which was denominated as a "reconciliation account," further supports our conclusion that the legislature intended these monies to be applied consistently with the purposes of the Act and not simply to be utilized for general governmental purposes.
8 The State, of course, has the right to audit the hospitals' submissions to ensure that the hospitals have correctly reported their liability under the Act. For the purpose of this opinion, we assume that the hospitals have correctly reported their revenues resulting from the resolution of the New England Health case and that the hospitals are correct in their assertion that no adjustment was made to their reported quarterly revenues, or in final settlement, as a result of their payments to the Plan, pursuant to the Judgment of the District Court.
9 The agreement between the hospitals and the Plan does not attempt to attribute the anticipated revenues to particular patient bills or to particular dates of service. It is unknown to this Office whether hospitals would be able to demonstrate to the satisfaction of the Commission that various portions of these anticipated revenues are attributable to particular dates of service.
10 In lieu of being redistributed in accordance with the statutory formula, these funds, or some portion thereof, may be utilized for other purposes specified in § 19a-168b(b)(2)(E), including grants to hospitals for lower income patients who have no insurance, or for outreach and eligibility determinations for emergency assistance to families.
The most recent redistributive formula is the formula specified in Conn. Gen. Stat. § 19a-168b(e)(5) for fiscal year 1994, which formula includes consideration of the sum of each hospital's uncompensated care plus the authorized proportion of Medicare, medical assistance and CHAMPUS underpayments.
11 The Commission must also be mindful of the statutory requirement that aggregate Pool distributions may not exceed aggregate Pool revenues. Conn. Gen. Stat. § 19a-168b(a)( ("The administration shall not pay out from the pool, and shall notify the department of social services not to pay more than is available to the pool").
12 It is our understanding that, as a matter of administrative practice, hospitals will be requested to make their payments payable to the State of Connecticut, and mail them to the attention of Mr. Kevin Carey, Office of Health Care Access, who will ensure that these funds get deposited in the special reconciliation account established pursuant to Public Act 95-160.