The Phoenix City Council last week adopted a temporary tax on local hospitals to generate matching funds for federal grants under the state’s Arizona Health Care Cost Containment System.

The tax, which would expire at the end of 2013, is expected to provide $130 million of local money to obtain $200 million of federal assistance for uninsured and underinsured patients. It cannot be passed along to patients.

Providing the required care is expected to cost area hospitals more than $500 million in 2013, city officials said.

Mayor Greg Stanton said the funds generated by the tax will strengthen the financial position of area hospitals.

“This is the right move for this city at this time for jobs and economic development,” Stanton said. “We cannot allow our hospitals to be put at a competitive disadvantage.”

The tax will go into effect Jan. 13. It covers 11 hospitals in Phoenix. The ordinance exempts government-run and specialty hospitals as well as facilities with a large percentage of patients from out of state or covered by Medicare.

Phoenix must sign an agreement with the Arizona health care cost system before the hospital tax can be levied. The tax must be approved by the state’s Municipal Tax Code Commission.

The 2011 Legislature approved the bill allowing cities to create a funding source for the federal match after a statewide tax proposal failed to pass.

Linda Hunt, president of St. Joseph’s Hospital and Medical Center, spoke in favor of the hospital tax.

“It’s a temporary solution until the state policy makers can enact longer-term policies,” Hunt said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.