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Is hospital funding stuck in an 80-year-old model?

Dominic Calabro, chairman of Gov. Rick Scott’s new commission on hospital funding, says the group will need to answer two questions:

--Are local hospital taxing districts, which use local property tax assessments to pay for indigent care, still appropriate?

--Given the variety of ways the districts take in money and pay it out, what kind of set-up works best?

“They really are structures of the last century,” Calabro said. Most if not all were formed before Medicare and Medicaid were created in the 1960s, he said, let alone other programs that subsidize treatment for low-income uninsured people, such as the Medically Needy program or the "Low Income Pool" funds the state distributes to hospitals.

Scott named Calabro, president of Florida TaxWatch, as chairman of the Commission on Review of Taxpayer Funded Hospital Districts this week in an executive order. Florida TaxWatch is a non-partisan, non-profit group that looks for ways to cut costs in government and may be best known for issuing its list of budget "turkeys" -- legislators' pet projects -- after each session.

Calabro said the commission may determine that some types of districts still have value. On the other hand, “some forms are maybe so outdated there needs to be some kind of ‘sunset’ so they go out of existence,” he said.

“Sunset” refers to the legislative practice of regularly reviewing whether laws are still needed.

Calabro knows a lot about special taxing districts. Two years ago, he edited and published a report specifically on the topic that the new commission was formed to study.

The TaxWatch report, “Florida’s Fragmented Hospital Taxing District System in Need of Reexamination,” said that taxing districts formed to meet one specific need sometimes don’t go out of business when that need is met. Using other people’s money, they find new things to do.

“Hospital districts have been subject to the same criticisms as other special districts in Florida: lack of accountability, mismanagement, escalating taxes, and expansion of purpose and power,” the study said.

While there are 32 active hospital districts in Florida, the TaxWatch study reported special concern with the 16 “independent” hospital taxing districts created by the Legislature. Those 16 districts are in 12 different counties; Volusia has the most, with three.

The independent hospital taxing districts have the right to impose property taxes, but the “millage rates” they set fall outside the caps set for counties and cities, the study said. And their governing bodies are not under the control of a county or city board and thus their budgets are not closely scrutinized, it said.

That led to an odd situation, discovered in a 2003 Attorney General’s study and recounted in the TaxWatch study: Even as the percentage of uninsured patients in non-profit and government-owned hospitals declined in the 1990s, the tax revenues in some districts were going up.

Meanwhile, for-profit hospitals were seeing more uninsured patients but not sharing in the revenue from the hospital taxing district, the study said. That led to questions of fairness – and in Sarasota County, to a lawsuit that is still going on.

Another finding in the Attorney General’s study was that the Broward districts paid their own hospitals at a rate higher than Medicare and Medicaid, thus removing any incentive to help patients enroll in the public programs.

By creating hospital districts one at a time through special acts, the Legislature inadvertently built a confusing “hodgepodge of characteristics, powers and regulations,” the TaxWatch study concluded.

Now that Calabro has the power to do the review that his own report called for, he’s in the position of the dog who finally catches up with the car he’s been chasing.

Calabro seemed a bit overwhelmed at the challenge and tight time frame. He said he hasn’t had a chance to talk to Scott or his staff about the scope of the project, the budget or the source of funds to hire an executive director and staff.

He said he doesn’t know whether the panel is supposed to focus only on the independent hospital taxing districts that operate their own facilities, or include districts that distribute money to lots of hospitals without owning one -- or even government-run hospitals funded in ways other than through a hospital taxing district, such as Jackson Memorial.

The executive order doesn’t really make that clear. It does cover a lot of ground, though.

Calabro said: “I was reading it and I thought, ‘Wow, that’s a big challenge! It’s a very big task, a very important one.”

--Carol Gentry, Editor, can be reached at 727-410-3266 or by e-mail. Letters to the Editor are welcome.

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.