Hospital Districts Provide Critical Financial Support for Community Hospitals

By , SVP Hospital Financial Operations September 16, 2019 Financial Performance, Operational Improvement, Hospital Turnaround

Stemming the closure rate of rural hospitals may depend in part on the financial support provided by hospital tax districts. This can be difficult to swallow for many who are reflexively against higher taxes. However, voters may come around when the case is made that a modest property- or sales-tax levy or hike could provide the necessary financial support to keep their hospital open and sustainable for their community.

Hospital Tax Districts Fill a Funding Gap

Tax districts help ensure the survival of hospitals that may be at risk of closing without taxpayer support. Taxes help plug financial gaps and cover the cost of treating uninsured or indigent patients.

Community and rural hospitals with no or insufficient tax support are also squeezed by Medicare and Medicaid cuts as well as uncompensated care. These financial hardships mean many have been forced to scale back services, close units or close altogether. That delays medical care and results in worse outcomes for people in those communities.

A 2017 federal study indicates that rural Americans already are at higher risk, and long travel times to trauma centers after a local hospital closes worsens the problem. Tax support could prevent this from happening—and might even mean the difference between life and death for some patients.

The Controversy

Although generally beneficial to rural communities, hospital tax districts—entities that can levy taxes to support the local hospital—often ignite controversy. This is due to the simple reality that people tend to resist new or raised taxes. Although challenging, it may be necessary to overcome this opposition to curtail the closure rate of rural hospitals. The best way to bolster support is to clearly communicate to voters how hospital tax districts serve the community.

Beyond Healthcare, Hospitals Help Communities

A hospital is usually one of the largest employers in the area it serves, and its revenues and spending as well as its employees and their salaries provide direct economic benefits to the community. A hospital’s closure often marks the start of a downward trend for the community and also reduces a community’s appeal for potential new businesses and residents.

Straight Talk Wins Support

Opposition to tax districts generally is higher when taxpayers perceive that a hospital has not been transparent about its finances or that the hospital’s spending may be off course. On the flip side, taxpayers can be reticent to subsidize hospitals that are profitable or performing well already. The state of their balance sheets notwithstanding, hospitals that turn to taxpayers as a means of making ends meet often face many questions from community members, which may spur grassroots campaigns that challenge taxing efforts to sustain the hospital.

The six CHC-owned or -managed hospitals that fall in tax districts frankly would not function as well without that support. These hospital districts prepare talking points and hold public hearings to explain how tax dollars are spent—to obtain equipment, hire needed physicians, or simply to maintain operations. District board members anticipate questions citizens might ask, especially the challenging and adversarial ones.

In notoriously tax-averse Texas, CHC-managed Freestone Medical Center, supported by the Fairfield Hospital District, recently gained overwhelming taxpayer support of a property tax increase by breaking down the numbers. The increase was only 21.5 cents per $100 of taxable value on taxpayers’ property. Expressed as such, it seemed like a small price to pay to save a hospital that the district had shown to be essential to the community.

Board advisor Tony Price probably spoke for all supporters when he told the local newspaper, “We don’t want to pay more taxes, but we certainly don’t want to lose medical services.”

By , SVP Hospital Financial Operations September 16, 2019 Financial Performance, Operational Improvement, Hospital Turnaround

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