Patient care at King’s Daughters Medical Center will not beseverely impacted by a state Medicaid tax many hospital officialsbelieve to be illegal and ill-conceived, according to KDMC’s topadministrative official.

“I can’t envision us having to stop any programs we have,” saidPhillip Grady, KDMC’s chief executive officer, “but this is goingto hurt us significantly.”

The tax is also not expected to shut down or postpone an $11million expansion and renovation project at the hospital.

“We will have to make the appropriate adjustments to keep movingforward with that project, but we are committed to completing it,”Grady said.

Hospital officials are concerned by an effort by Gov. HaleyBarbour to address a $360 million shortfall in the Medicaid programby taxing the gross revenue of all state hospitals.

Sam Cameron, president and chief executive officer of theMississippi Hospital Association, said the organization ischallenging the constitutionality of the governor’s plan.

“It is our belief only the legislative branch can impose a tax.The executive branch does not have that authority,” he said.

Cameron said the association has not filed a lawsuit, but “willseek legal recourse” should the governor continue to pursue theplan.

The federal government told the state to stop a previouslyapproved accounting tactic that pulled in more federal money forthe program. The result is a $360 million gap in funding thatlawmakers did not address in this year’s legislative session.

On the governor’s order, Medicaid will charge an assessment ofabout 1.5 percent on all hospitals’ gross revenues. Currently, onlypublic hospitals pay the assessment, which is about 0.35percent.

The assessment on private hospitals will have a severe impact,Cameron said.

“It’s going to be devastating to hospitals,” he said. “I won’tsay it will close any, but it will affect staffing andprograms.”

A reduction of employees and services has already been discussedand planned pay raises have already been frozen at some hospitals,Cameron said.

Aside from the constitutionality, Grady said there are alsomajor issues with the scope of the tax because it targets grossrevenues.

Grady said hospitals only receive 45 to 50 percent of grossrevenues because of contractual arrangements with insurancecompanies and indigent care. Medicaid and Medicare also rarelycover the full cost of services.

“You’re talking about a significant amount of money being taxedthat we would never collect,” Grady said.

Cameron said hospitals are being unfairly singled out to replacethe shortfall.

“There is no other business or industry in the state that pays atax on its gross revenues,” he said.

Further complicating the situation, officials said, is the shortnotice they were given of the tax. Collections begin Saturday.

“Non-governmental hospitals found out about this June 8,” Gradysaid. “Three weeks is not a lot of time to prepare for this. The(Division of Medicaid) has not worked well with the hospitalassociation and the hospitals to come up with a viable plan.”

Cameron said he first heard of the tax in May.