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Under Ducey’s budget, hospitals will pay for his education spending

Executive plan increases hospital assessment by $35 million

Gov. Doug Ducey (Photo by Katie Campbell/Arizona Capitol Times)

Gov. Doug Ducey (Photo by Katie Campbell/Arizona Capitol Times)

Arizona hospitals will pay more under Gov. Doug Ducey’s $10.1 billion spending plan.

The governor’s proposal, released last week, shows $79 million in “efficiency savings” or cuts to agency budgets for things like employee vacancies and lower utility bills.

But one item listed as an “efficiency savings” will actually increase the hospital assessment, which pays for Medicaid expansion, by $35 million.

That’s because the governor is proposing to move behavioral health services for childless adults to the same funding stream as acute care. Currently, tobacco taxes and the hospital assessment pay for acute care coverage for childless adults and those covered through Medicaid expansion.

Ducey will use that money to fund his spending priorities in education, as the majority of new spending in his budget, about $250 million, goes to schools.

The assessment will increase by 12 percent, generating $35 million, because of the policy change, according to the Governor’s Office of Strategic Planning and Budgeting.

AHCCCS Director Tom Betlach

AHCCCS Director Tom Betlach

By law, the AHCCCS director, Tom Betlach, can increase the hospital assessment without the Legislature’s approval.

All told, the hospital assessment will increase by $39 million, from $287 million to $326 million, with $4 million accounting for caseload growth.

The state integrated services for behavioral health and acute care to put both programs under AHCCCS in 2015, and the governor now wants to align the way the two sides are paid for, Ducey spokesman Daniel Scarpinato said.

Since the time the hospital assessment was adopted in 2013, hospitals have seen the amount they pay for uncompensated care – medical services that don’t get reimbursed – go down significantly, Scarpinato said.

“We want to work with (the hospitals). We think that this is obviously something that will be spread across all hospitals that are offering these services,” he said. “This obviously won’t have any impact on services.”

Greg Vigdor, president of the Arizona Hospital and Healthcare Association, said in a news release that his group is aware of the proposal and is “seeking further clarification in terms of the impact to Arizona hospitals.”

Another major piece of Ducey’s “efficiency savings” will come from transferring $15 million from the Arizona Health Care Cost Containment System to the Department of Economic Security to pay for health care for developmentally disabled children. AHCCCS’ general fund money will decrease by $15 million. But since general fund spending for DES will increase by a commensurate $15 million, the net savings is actually zero.

In other areas, the Department of Transportation will see a drop of $5.2 million in its general fund budget, replaced with funding from the State Highway Fund.

More than $2.8 million will be saved by implementing a cap on private prison capacity. According to state contracts, the Kingman and Red Rock prisons, operated by private prison companies, have to keep beds at 97 percent capacity. The state wants to leave the remaining 3 percent vacant.

The executive budge also proposes a one-time reduction of $1.8 million in the general fund for capital spending, but this money will be used to cover increased rent for state buildings.

Other smaller savings will come from lower energy and utility costs, vacancy savings and shifting money to special funds instead of the general fund. For example, a $1 million appropriation for AIDS reporting and surveillance will come from the Disease Control Research Fund.

Another $1 million will be swept from the Department of Tourism in the next fiscal year. The money will come from savings on the agency’s marketing and advertising budget.

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