EMHS Testimony in Opposition to the Elimination of Not for Profit Property Tax Exemption

Response to the following: An Act Making Unified Appropriations and Allocations for the Expenditures of State Government, General Fund and other Funds, and Changing Certain Provision of the Law Necessary to the Proper Operations of State Government for Fiscal, General Fund and other Funds, and Changing Certain Provision of the Law Necessary to the Proper Operations of State Government for Fiscal Years Ending June 30, 2016 and June 30, 2017

Senator Hamper, Representative Rotundo, Senator McCormick, Representative Goode and members of the Appropriations and Taxation Committees, my name is Lisa Harvey-McPherson, and I am here today representing EMHS in opposition to the budget proposal to eliminate the property tax exemption for not for profit organizations.
Maine-Counties-EMHS.jpgI want to begin my comments with an overview of Eastern Maine Healthcare Systems (EMHS). We are an integrated and comprehensive health care delivery system caring for Maine citizens. Our service area stretches from southern Maine to the Canadian border. Our hospital members include; Mercy Hospital, Inland Hospital, Sebasticook Valley Hospital, Charles A. Dean Memorial Hospital, Blue Hill Memorial Hospital, Eastern Maine Medical Center, Acadia Hospital and The Aroostook Medical Center. Our system also includes home care providers, hospice care, nursing facilities, air and ground emergency transport and a senior care retirement community. And, EMHS is proud to be one of the original and very successful Pioneer Accountable Care Organizations helping to transform healthcare delivery and payment for Medicare beneficiaries. In fact, we’ve revised our employee health plans in the ACO model.
The premise of our opposition is simple; our members have earned their exemption through service to our patients and communities. The strongest example of commitment to our mission to care for the people of Maine is reflected in our charity care and bad debt uncompensated care burden. Over the past two years, policy decisions were made to eliminate MaineCare coverage for some and to eliminate access to MaineCare for others. Some financially challenged citizens have been able to purchase commercial coverage through the exchange but unfortunately find themselves unable to afford the copayment and deductible financial obligation for their plan. Combined, this dynamic has shifted the burden of caring for Maine’s unwell and financially challenged citizens onto healthcare systems and health centers across the state. The 2013 bad debt and charity care burden for EMHS was $126.8 million, and grew to $138.7 million in 2014. The total value of community benefit provided by EMHS members in 2014 is summarized in the EMHS annual report. The annual report can be viewed at our website, EMHS.org.
It is also important to remember that Maine hospitals already pay a hospital tax. The hospital tax and match program is a mechanism to generate funds that can draw additional federal matching dollars into Maine. Unfortunately, the net impact for EMHS hospitals is a tax burden in excess of matching funds received. In 2014, our hospitals combined paid hospital taxes totaling $25.4 million with matching funds of $20.7 million. Our net impact amounts to an excess tax burden of $4.7 million dollars.
In advancing the proposal to eliminate the property tax exemption, justification has included the intent to have exempt organizations pay for various municipal services utilized by the organization including fire safety, road maintenance etc. What the justification lacks is recognition of the property taxes already paid by exempt organizations on properties owned that are taxable. For EMHS members, property taxes PAID in 2014 totaled more than $1.5 million dollars. Additionally many EMHS hospitals provide ambulance services to local communities including Presque Isle, Greenville, Pittsfield and Bangor. Our members relieve wholly or in part municipal responsibility for ambulance services and absorb the financial losses for this critical community benefit. The Governor’s proposal to eliminate the not for profit property tax exemption and REQUIRE communities to implement the tax assessment methodology would add an additional tax burden of $2.8 million dollars to EMHS members based on the assessed value of our property.
The patients in our care and their families are charitable in their recognition of the services they receive. From advancing technology for life saving procedures to cancer care and hospice care, patients and families generously donate to support the services we provide. Unfortunately the Governor’s tax proposal proposes to eliminate the personal income tax deduction before the income tax is eliminated in its entirely. Further exacerbating the financial gap between services provided and revenues received.
As a health care organization we generate revenues for the patient care services we provide. We also know that governmental payments from Medicare and MaineCare fall short of the actual cost of providing care. In 2014 EMHS members received a Medicare payment shortfall totaling $89 million and the MaineCare payment shortfall totaled $66.5 million. From charity care and bad debt, to the hospital tax and property taxes paid, we must generate revenues to cover these financial obligations. The tax proposal before you today results in a sick tax being shifted onto the patients with financial and commercial coverage resources.  As we have experienced with MaineCare, the healthcare needs of Maine citizens haven’t changed, the state has only shifted the financial burden out into Maine’s healthcare provider community.
Thank you for the opportunity to express our opposition to the proposal to eliminate the not for profit organization tax exemption. We strongly urge you to reject this proposal.
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