A state agency charged with lowering healthcare costs in Connecticut has raised an assessment levied on hospitals by 40 percent over the last four years to fund the salaries and benefits of a growing number of employees within the agency, adding millions to annual payments made by hospitals.
The Office of Health Strategy’s (OHS) $18 million budget is largely funded by more than $100 million in annual assessments placed on insurance companies, which are deposited into the state’s Insurance Fund and used to cover state agency costs, including OHS. Nearly $14 million of the agency’s budget in 2025 came through the insurance assessment, according to the Office of Fiscal Analysis.
However, OHS is also supported by millions more from an annual assessment levied on acute care and children’s hospitals. Under state statute, the hospital assessment is paid into the General Fund and then goes to OHS to pay the staffing costs for the Health Systems Planning Unit (HSPU), which oversees the state’s Certificate of Need (CON) process, collects data from hospitals, and publishes annual reports on the financial status of hospitals, according to a report by the Office of Legislative Research.
Between fiscal years 2022 and 2025, the hospital assessment grew from $4.6 million to $6.4 million, a 40 percent increase.
“This escalating financial obligation comes at a time when hospitals are already under significant strain driven by rapidly rising operating expenses, including labor, pharmaceuticals, and electricity, as well as ongoing workforce shortages and inadequate Medicaid reimbursement,” the Connecticut Hospital Association wrote in an email. “At the same time, federal policy changes are expected to drive an increase in uncompensated care, further compounding the fiscal pressure on hospitals.”
According to an August 2025 email from OHS Chief of Staff Kimberly Martone to all acute care and children’s hospitals, the healthcare providers had to kick in another $231,846.26 when the HSPU’s costs came in over budget, bumping the total annual assessment from the budgeted $6.2 million to $6.4, with no explanation as to which employees the assessment covers nor why the increase was necessary.
The growth of OHS’s budget over the last four years, requiring more funding through assessments on insurance companies and hospitals, has been criticized by lawmakers in the past for perhaps adding to healthcare costs because the assessment costs are passed down to customers.
However, numbers presented in Gov. Ned Lamont’s budget proposal to dissolve OHS raise questions about how OHS was using those hospital assessments and the number of employees covered by the fee.
In dissolving OHS, the agency’s 42 employees will be moved into other departments, including transferring the HSPU’s 23 employees to the Department of Public Health that traditionally handled administration of the state’s CON process. The cost of transferring those employees to DPH is $2.8 million — far lower than the $6.4 million assessed on hospitals in 2025.
The OLR report lists twenty-two OHS job roles covered by the hospital assessment, with many of them accounting for multiple full-time employees, including attorneys and healthcare analysts, as well as employees whose pay is partially covered by the hospital assessment, including the OHS Commissioner, the Director of Communications, and the agency’s Legal Director.
Despite transferring HSPU staff to a larger department for less than half the cost of the hospital assessment, it doesn’t appear the assessment will decrease, according OPM Communications Director Chris Collibee.
“That hospital assessment supports CON functions and will be needed to support those activities at DPH,” Collibee wrote in an email. “Given the pressure and staffing needs to efficiently process CON applications, the administration does not believe that the state could reduce that assessment or the capacity it will support at DPH.”
Vice President of Community, Corporate, and Government Relations for Yale New Haven Health — and Lamont’s former chief of staff — Paul Mounds writes in testimony to the Appropriations Committee that the hospital assessment should follow state statute, which “underscores that assessment dollars cannot be used as a flexible funding source for general agency restructuring or unrelated staff activities, even when important or well intentioned.”
“The Governor’s proposed budget and the Department of Public Health confirmed that 23 positions representing the HSPU are proposed to move from OHS to DPH at a total cost of $2.8 million, and that this cost is tied to the hospital assessment,” Mounds wrote. “The assessment should match actual HSPU operating costs, yet the proposed transfer accounts for less than half of the total assessment to hospitals.”
As one of the two largest health systems in Connecticut, the YNHH system includes four hospitals, and their annual assessment has risen from $1.6 to $2.3 million since 2022, according to an informational bulletin.
OHS, however, says the increased assessment was an investment into a more streamlined and efficient CON process, pointing to metrics showing a 36 percent decrease in the number of days between filing the application and when the application is deemed complete; a 63 percent decrease in the number of days between a completed application and a hearing; and a 58 percent reduction in the time between an application filing and a first action.
“The HSP has also enhanced its compliance function to ensure conditions in decisions or agreed settlements have been appropriately implemented,” an agency spokesperson said in an email to Inside Investigator. “In addition, the HSP implemented a new Emergency CON application and review process in 2025 and executed two expedited decisions, each in under 60 days. The Emergency CON application is, by statute, specific to acquisition of hospitals subject to bankruptcy proceedings.”
Yale New Haven Health also argues in their bulletin that the assessment is unfairly levied on hospitals alone, instead of other, non-hospital healthcare providers who make up most CON applications: “In 2025, over 70% of the certificate of need applications were submitted by non-acute care hospitals, yet 100% of OHS’s Health Systems Planning unit costs are funded by hospitals.”
In written testimony, Mounds offered some suggestions to improve the program, including ensuring the assessment is only used to fund staff who are authorized under statute and “maintain transparency and accountability in the collection and use of hospital assessment funds.”
A vast majority of OHS’s budget – 84 percent – goes toward consultants to manage massive data troves like the All Payer Claims Database and Connecticut’s health information exchange system, or for outside companies to assess data and produce reports like the state’s Healthcare Benchmark Initiative, which tried to hold healthcare provider to certain cost increases; that program has missed the mark multiple years by OHS’s own accounting.
The consultant costs, however, are paid through the Insurance Fund and the federal government, not through the hospital assessments, which goes toward in-house OHS staff only. Connecticut’s Certificate of Need (CON) process requires health providers to get state approval before expanding or reducing services, changing ownership, or even buying new equipment.
HSBU staff also produce annual reports on the financial health of Connecticut’s hospitals — the latest of which was released in February 2026 and found that, statewide, hospitals over that last five years have had a negative 4.6 percent margin and a negative 2.3 percent margin in 2024.
The CHA says transparency and accountability regarding the assessment is necessary given the financial strain hospitals face and that any revenue not used in line with state statute should be “returned to hospitals to support patient care.”
“As the state works to disband the Office of Health Strategy and redistribute responsibilities, it is essential that these assessment funds be used exclusively for the purposes authorized in statute; specifically, to support activities directly tied to the Health Systems Planning Unit (HSPU),” the CHA wrote. “They should not be diverted to broader agency operations or to support functions unrelated to statutory responsibilities, regardless of where those responsibilities may be reassigned.
“The statutory framework is clear: these dollars should not be a flexible funding source for general staffing or agency-wide expenses,” the hospital association wrote.
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