State officials admit a plan to create an “assessment” onprivate hospitals to help cover a $360 million federal Medicaidfunding shortfall is not ideal, but they say their options arelimited.

The plan, expected to begin July 1, was postponed last weekuntil Sept. 1 to provide state and hospital officials time tofurther discuss other potential solutions, said Pete Smith, Gov.Haley Barbour’s press secretary.

“It probably not the perfect plan, but it’s the best we have,”he said. “The only option we have at this time is thisassessment.”

Hospital officials have said the plan to tax the gross revenueof all state hospitals was ill-conceived and possibly illegal. TheMississippi Hospital Association is challenging theconstitutionality 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,” said SamCameron, president and chief executive officer of the MississippiHospital Association.

Smith said that regardless of the source, whether it was issuedby the governor or legislative action, the plan was the only optionavailable to the state at the moment.

“We can’t do what we’ve been doing, according to the federalgovernment,” he said. “This is the best plan we have right now.This is the proposal on the table.”

The state agreed to postpone the plan, however, to “continue totalk to all parties to find an equitable solution,” Smith said.

The controversy developed when the federal government told thestate to stop an accounting tactic begun 14 years ago with federalapproval that pulled in more federal money for the program.

“It’s not just Mississippi,” Smith said. “A lot of other statesare involved.”

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 0.35 percent,according to The Associated Press.

“We’re trying to level the playing field to make it fair for allhospitals,” Smith said.

However, Phillip Grady, chief executive officer at King’sDaughters Medical Center, said he had objected with the scope ofthe assessment because it targets gross revenues instead of netprofits.

Hospitals only receive 45 to 50 percent of gross revenuesbecause of contractual arrangements with insurance company andindigent care, he said. Medicaid and Medicare cases rarely coverthe full cost of services.

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

Hospital officials also claim they had little time, in somecases a month, to respond to the proposal and realign theirfinances.

Smith disputes that claim.

“It shouldn’t have come as a surprise to anyone. We’ve beendiscussing this for well over a year,” he said.