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Facing rising costs for labor, supplies and prescription drugs and a $3 billion gap between the cost of care and Medicare and Medicaid reimbursement, advocates and lawmakers say that some Connecticut hospitals are in a fragile state.
Further, The Connecticut Hospital Association, medical doctors Sen. Saud Anwar, the co-chair of the Public Health Committee and Sen. Jeff Gordon, also a member of the committee, have voiced concerns about Gov. Ned Lamont’s budget proposal, which would impose $100 million more in taxes on hospitals if implemented, according to the CHA.
In addition to the hospital tax and low Medicaid reimbursement rates, an estimated 100,000 Connecticut residents could next year lose Medicaid coverage under the implementation of HR 1, President Donald Trump’s “Big Beautiful Bill Act,” increasing uncompensated care and deepening hospitals’ financial problems.
Paul Kidwell, senior vice president of policy for the Connecticut Hospital Association, said the full increase in the hospital tax should be allocated to hospitals for patient care.
“We have to buy (prescription) drugs,” said Kidwell. “We need a good labor force. We need energy. We need all of those things. We are trying to be as efficient as possible but we can’t sort of ‘efficiency’ our way out of what is a fundamental flaw in our payment level. And we need the state’s help to do that.”
Chris Collibee, spokesman for the Office of Policy and Management, said the administration is working with the hospitals “to ensure that they have the funding they need to provide quality care.”
“In fact, the governor proposed increasing hospital payments by $140 million, more than offsetting the proposed tax increase,” Collibee said. “Hospitals should use these additional funds for their stated purpose of improving care.”
Comptroller Sean Scanlon said the state has struggled to raise Medicaid reimbursement rates in the last few decades, but at the same time, the state has grappled with a fiscal crisis.
“And that has certainly had a negative impact, both on hospitals and other providers, and on the population of those on Medicaid that we’re trying to serve,” Scanlon said.
Scanlon said the hospitals and the state are in negotiations centered on a shared commitment that people continue to have access to health care.
The fiscal picture for hospitals
The Office of Health Strategy’s latest annual report on the financial status of Connecticut hospitals found that health system losses totaled “nearly $505 million, an increase from the $473 million in operating losses reported by health systems in fiscal year 2023.”
Referring to the OHS report, Kidwell said that hospitals’ operating margins are on average 0.2%.
“And that was an improvement over -0.5%,” he said. “We have a defined period of time here where hospitals in the state on average are either negative or barely ahead of a 0% margin.”
Kaufman Hall, a Chicago-based health care consulting firm, reported in its National Hospital Flash Report that operating margins for hospitals in the Northeast have remained flat in 2025 compared to 2024.
Erik Swanson, managing director and data and analytics group leader for Kaufman Hall, said that overall hospital margins have not recovered to levels prior to the pandemic and are “likely not at a level which allows for appropriate reinvestment back in the health system.”
Medicaid reimbursement rates
The Hospital Association has said that Connecticut’s “distressingly low Medicaid reimbursement rates lag significantly behind other states and create barriers to health care access for low-income residents.”
Kidwell said that the state’s Medicaid reimbursement is 62 cents on the dollar for the care hospitals provide to patients on Medicaid.
Gordon said the state has one of the worst Medicaid reimbursement rates.
“And it’s just been getting worse because it hasn’t been updated in several decades,” Gordon said. “So what happens is that you may well find the hospitals are suffering bigger losses. Emergency medical services will suffer losses, which means they have less money to invest in equipment and ambulances and staff salaries and benefits.”
Asked if he believes that the Medicaid reimbursement rate should be increased, Collibee said “over the period of the settlement the hospitals have received rate increases far larger than any other Medicaid provider.
“The inpatient rates increased by over 45% and the outpatient rates by over 20%,” he said. “The Medicaid rate study found that hospitals were well-positioned when compared to neighboring states.”
Kidwell said hospitals incur a $1.5 billion deficit per year due to Medicaid.
Yale New Haven Health’s system has a high percentage of Medicaid patients. There Fiona Phelan, media relations manager for Yale New Haven Health, said YNHHS is paid 56 centers on the dollar for the care the hospital provides to patients on Medicaid.
“Those under-reimbursed services for some 663,500 Medicaid beneficiaries amounts to a loss of $450.3 million for the Health System,” Phelan said. “Additionally, YNHHS provided free or discounted health care services to 113,091 eligible people at a loss of $205.8 million last year.”
Trinity Health of New England also serves a large number of patients on Medicaid.
“Trinity Health Of New England hospitals, Saint Francis and Saint Mary’s, face some of the most significant pressures in Connecticut, driven by a payer mix that creates substantial reimbursement challenges,” a Trinity Health spokesman said.
“More than 30% of the patients we serve are covered by Medicaid or are uninsured, and fewer than 19% are covered by commercial insurance. Adding to the challenge, our hospitals are paid 30% to 50% less than other Connecticut hospitals by commercial insurers for the same services.”
“To sustain our mission of remaining a transformative and healing presence in our communities, we cannot continue to do more with less,” the Trinity Health spokesman said. “Medicaid underpayments have a ripple effect that impacts everyone who relies on us for care. Every community we serve feels the consequences — reduced services, longer wait times, staff reductions, and the potential closure of programs and services.”
Anwar, co-chair of the state’s Public Health Committee, has said he is concerned about the long-term well-being of Saint Francis Hospital in Hartford and has asked Trinity Health’s CEO Montez Carter to consider a “frank conversation with Trinity’s headquarters in Michigan or Yale New Haven Health to acquire the hospital because the hospital needs investments.”
OHS’ report on the financial status of Connecticut hospitals reported that Saint Francis Hospital’s total expenses were $914 million with a loss of $54 million and a negative operating margin of 6.4%.
Saint Francis Hospital in Hartford on Friday, Nov. 21, 2025. (Aaron Flaum/Hartford Courant)Saint Francis Hospital has struggled over the last several years with staffing and fines from the state Department of Public Health.
Kidwell said further that there are concerns that the implementation of HR 1 next year will cause many people to lose their Medicaid coverage, which could likely “mean hundreds of millions of dollars in costs.”
“I think the concern is access,” Kidwell said. “Can we sustain all of the access that we strive to? When people come to the hospital what will their conditions be? So we’re very concerned obviously about people losing coverage because those people don’t stop seeking care. And when they come to the hospital emergency department they’re likely sicker.”
Hospital tax
Anwar said he is concerned about the governor’s proposal concerning the hospital tax.
“The hospital tax may harm the well-being of our hospitals,” he said. “We need to find the balance at this time.”
Collibee said the governor’s proposed increased net payments to hospitals are “one of the most significant investments in the governor’s Feb. 4 budget proposal.”
The hospital tax is used by the state to fund its share of Medicaid payments, which trigger an at least dollar-for-dollar match from the federal government. While the intent of the tax is to strengthen hospitals’ financial stability and reinvestment, Connecticut diverted some of the tax as the state struggled with budget deficits. The hospital industry sued and won a legal settlement in 2019.
Kidwell said that the hospital tax “driven by the legal settlement reached between the state and hospitals in 2019, is intended to help partially address the gap by enabling Connecticut to use provider tax revenue paid to the state by hospitals as the state’s share of Medicaid spending, drawing down additional federal matching funds that can be reinvested in hospitals and patient care.”
He said the 2019 settlement reached after disputes over hospital tax revenue expires in June 2026.
“As policymakers consider the future of the tax, it is critically important to structure it in a way that maximizes federal funding and strengthens support for hospitals and the patients they serve,” he said.
Under the governor’s budget proposal, the tax will increase by $100 million to $920 million.
The state will be the largest beneficiary of the tax hike, increasing its gain by an extra $53 million, according to CHA.
Of the $40 million set aside for the hospitals, $15 million will be designated to Waterbury Hospital, which would no longer pay the tax and the remaining $25 million would be divided among the 23 remaining hospitals, according to the CHA.
Gordon said the full increase in the hospital tax should be used to improve patient care.
“I think the hospital tax is a crazy convoluted system,” he said. “I don’t think the state government should be pocketing the change and using it for something else.”
Scanlon said that the hospitals sued former Gov. Dannel Malloy “because they did not feel that the money was going back to them and they were not wrong about that.”
“But since 2019 when Gov. Lamont took office, he settled the lawsuit with the hospitals and there has been consistent money flowing to the hospitals,” Scanlon said. “Since that settlement they have made more money every single year under this governor than they had previously.”
He said that the tax was increased last year in “coordination and collaboration with the hospitals to try and get something done and get more money for hospitals before HR 1 was passed.
“It wasn’t done arbitrarily in a vacuum,” he said. “Unfortunately we don’t think we got that done in time. And as a result we are now in conversations with the hospitals about lowering that tax. But the idea that we just raised their tax to raise their tax is not accurate. This was done as a way to protect them, to help them and the people they serve.”
In the short term, Scanlon said the state is working with hospitals to provide assistance to them “while working toward a long-term solution.”
