The Strickland administration is proposing a hospital franchise fee in his 2010-2011 state budget that would generate around $600 million for the state, but would cost hospitals around $411 million, and that has drawn comments from hospitals around the state, including Southern Ohio Medical Center.

“We know the difficulties the governor is going through to balance the budget,” said Randy Arnett, president and CEO of SOMC. “We go through the same type of procedure here trying to make out budget balance.”

The governor’s health care budget includes a 1.27 percent fee on hospital operating costs in 2010, increasing to 1.37 percent in 2011.

“That assessment will be pooled with assessments from other hospitals and nursing homes and will be used to get matching federal dollars,” Arnett said. “Dollars returned back from the state will be $1.2 million per year. We will lose outside of $1.8 million a year in reimbursement from the state.”

Arnett said there is another possibility which would even be harder on the hospital.

“If the proposed budget does not pass as is, the state budget office indicates there will be a 15 percent reduction in the reimbursement fees,” Arnett said. “We would lose $3 million annually if that happens. You’re on one side of a sharp sword or one side of a sharper sword.”

The Cleveland Clinic is saying it will be forced to cut more than 400 jobs if that fee stays in the budget.

However, the Strickland administration is standing by the franchise fee, saying it was included in the governor’s two-year budget proposal to help support the state’s Medicaid coverage for 1.8 million Ohioans.

Arnett said SOMC won’t be as hard-hit as some facilities if the proposed budget passes.

“We get back 40 cents of every dollar we’re taxed,” Arnett said. “It won’t hurt us as bad as some other places because we have a higher rate of Medicaid patients. But it does affect us. If you equate it (the assessment amount for SOMC) to cost-cutting, if we had to lose $1.8 million in our organizaton, that would be 40 full-time employees.”

The Ohio Hospital Association is telling Strickland the fee would cost all hospitals $410 million and lead to more than 6,800 layoffs.

Arnett said SOMC is not supporting the governor’s proposed budget but “we’re hoping he will alter the budget so as to not negatively impact those hospitals and long term nursing facilities that care for a higher number of Medicaid recipients.”

Strickland said decisions such as the one to put the fee on medical facilities is his way of making tough decisions in dealing with the state’s budget crisis.

“We understand the challenge he’s facing,” Arnett said. “SOMC goes through a similar process. You have to cut costs without impacting patient care when we are in a global recession as we are right now.”