Representatives from Maine’s two largest hospital systems are warning that tax changes proposed by Gov. Janet Mills could further destabilize an already financially fragile system.
The Mills administration has proposed changes as part of the governor’s supplemental budget that would reduce provider payments to hospitals by nearly $11 million during the current fiscal year and by more than $24 million per fiscal year moving forward.
Hospital officials told lawmakers Tuesday that they understand the need to periodically update how the state calculates the taxes that facilities pay, but in the past, such changes were accompanied by other measures to lessen the immediate financial impact.
Jeff Austin with the Maine Hospital Association said all of the hospitals combined in the state made just $21 million in 2024 after factoring in the many facilities that lost money and those that were profitable. So Austin said the administration’s proposal “would wipe that out” in one stroke.
Austin said the proposal also calls for hospitals to pay the first $10 million in additional taxes in May.
“That’s like 90 days from now,” Austin told members of the Legislature’s budget and health and human services committees. “That’s not in anybody’s budget. We were not given a heads up. There was no way to plan for that.”
Lisa Harvey-McPherson with Northern Light Health said the company still lost $15 million during the last fiscal year despite reducing services, eliminating hundreds of positions and closing Inland Hospital in Waterville. And that was an improvement from $156 million in losses in the prior fiscal year, she said.
“We are in no position to pay a tax in the next 90 days,” Harvey McPherson said.
Sarah Calder with MaineHealth estimated that the tax changes and other reductions in the budget proposal will result in a $48 million loss annually for the hospital system.
“Maine’s hospitals are hanging by a thread,” Calder said. “While we appreciate the department’s efforts to improve payment timeliness, the proposed tax increase without a match and the physician service cuts move us in the wrong direction. In our current financial position, additional unanticipated costs will inevitably translate into reduced access to care.”
The Legislature’s Appropriations and Financial Affairs Committee is holding public hearings on the supplement budget this week and next week.
This story appears through a media partnership with Maine Public.
