April 7, 2016

Dear Legislator,
Over the past several years, Medicaid rate cuts, reductions in provider fees and unfunded mandates
added at the federal and state level have brought Oklahomas health care system to the brink of a
crisis. We are writing today to inform you that any further reductions in funding will trigger that
crisis in earnest, with disastrous repercussions for our most vulnerable populations, not to mention
our economy.
Any rate cut is a cause for alarm. Not only are we providers suffering due to rate cuts of recent
years, but we have staved off further reductions by digging into our own pockets to help the state
garner significant federal matching funds through our Supplemental Hospital Offset Payment
Program (SHOPP) and the nursing home Quality of Care Fee. The current situation is so tenuous that
any further cuts, let alone the Oklahoma Health Care Authoritys proposed 25% reduction, would
send Oklahomas health care system into an irreversible freefall with mass closures of medical
facilities being a certainty.
We believe there is a moral imperative to prevent this collapse of our health care infrastructure, and
we are urging you to support a responsible and forward-thinking revenue collection measure that
can help avert catastrophe: the adoption of a $1.50 per pack increase to the cigarette tax and the
use of those tax revenues to avoid devastating cuts in health care.
Increasing our cigarette tax is a health-conscious proposal that we would support under any
circumstances. Studies have shown that a $1.50 tax increase per pack would help reduce
consumption of cigarettes by 26 million packs a year, reduce the prevalence of adult smokers, and
prevent almost 32,000 children from ever becoming smokers. Given that tobacco use is the number
one cause of premature death in Oklahoma, this is a policy that is guaranteed to save lives. It is also
estimated to yield $182 million annually in revenue collections as well as $1.25 billion in long-term
cost savings.
The practical, responsible reasons for a cigarette tax increase are not lost on the public. A 2015
survey from CHS and Associates found that 62 percent of voters support the proposal, with support
evenly divided among Republicans and Democrats.

We understand that the tobacco lobby, as always, is exerting its considerable influence to oppose
this legislation. Many of their arguments center around the economic impact to convenience stores
or the possibility of smokers crossing state lines to purchase cigarettes.
We urge you to weigh those arguments and the consequences of passing a cigarette tax increase
against the alternative: deep and permanently damaging cuts to health care funding.
Consider: Reductions in Medicare and Medicaid payment rates to Oklahoma hospitals enacted over
the last few years amount to more than $520M per year. This includes 18% cuts alone in Medicaid
rates, contributing to the fact that over 55% of the states rural hospitals now operate with negative
margins. Any further payment cuts, let alone the proposed 25% recently announced by the OHCA
(an additional $185M per year loss) will necessitate hospitals closing down services, specifically
access to OB and mental health care, due to their high Medicaid volumes.

A very recent survey by the Oklahoma Hospital Association of its member hospitals revealed that
proposed cuts mean:

16 hospitals would plan to terminate 20+ employees (10 in rural communities; 6 in

suburban/urban settings)

11 hospitals would terminate OB and/or Mental Health services (8 in rural communities; 3 in

suburban/urban settings)

24 hospitals would serious evaluate their ability to maintain either of these services (17 in
rural communities; 7 in suburban/urban settings)

A January 2016 study published by the national health analytics company iVantage reported 42
Oklahoma hospitals are at-risk of closure, up from 15 hospitals in 2014. Already this year, before
the recently proposed 25% payment cut, 2 hospitals had closed; 4 are evaluating terminating their
inpatient services; and 3 are wondering if they can continue to maintain operations through this
calendar year.
The effect on nursing homes, who are federally prohibited from enacting most cost-containment
measures that other entities would pursue when faced with cuts, may be even worse. Any rate cut
would lead to a significant amount of closures; a 25 percent rate cut would essentially gut the
infrastructure that takes care of the states vulnerable elderly population. The Oklahoma Association
of Health Care Providers estimates that at a 25 percent rate cut:

269 of 289 or 93 percent of Oklahoma nursing facilities would be insolvent and at a high
risk of closure

16,800 vulnerable seniors would be displaced from their homes

16,900 nursing home employees would lose their jobs and $495 million in wages would
be lost.

Mass closure of nursing facilities would leave many of the states most vulnerable citizens homeless
and without the care they need to get through the day. This would trigger, in a very real sense, a
humanitarian crisis.
In our communications with lawmakers and budget-makers, we have been informed that the
proposed 25 percent rate cut may be mitigated by shifting cuts elsewhere. Once again, it is
important for lawmakers to understand that previous cuts have already left our health care system
in a precarious position. Some hospital and nursing home closures are inevitable even if funding is
left at current levels. Any rate cut could destabilize our system and result in facility closings,
widespread reductions in service levels and ultimately lives lost. We simply are unable to sustain any
additional cuts without major repercussions to the health of Oklahomans.
The choice for us is clear: implement a responsible increase in the cigarette tax or pursue a deeply
irresponsible dismantling of core state services. We hope you will agree that a new tax which
discourages smoking and will ultimately save lives is preferable to government-cuts that will most
surely cause unnecessary deaths.
Sincerely,

Craig W. Jones
President, Oklahoma Hospital Association

Tandie Hastings
President of the Board, Oklahoma Association
of Health Care Provider