AB 770

Hospital Assessments

The state currently collects an assessment from hospitals based on their gross

inpatient and outpatient revenues. The biennial budget act specifies the total

amount of revenue to be collected from the assessment. The Department of Health

Services (DHS) then sets the assessment rate, which is the same for all hospitals, at

the percentage of gross patient revenue necessary to collect the total revenue amount

specified in the biennial budget act. Critical access hospitals, psychiatric hospitals,

and institutions for mental diseases are exempt from the assessment. A critical

access hospital is, in general, a hospital that provides 24 hour a day emergency care,

has 25 or fewer acute inpatient beds, and is located in a rural area in which there are

no other hospitals.

Current law directs DHS to use a portion of the hospital assessment revenue

to pay hospitals that are subject to the assessment for services provided under the

Medical Assistance Program (MA). Like other provider payments under MA, the

federal government pays a share of these MA payments to hospitals. Current law

requires that the MA payments to hospitals from the assessment revenue, together

with the federal share, equal the amount of the assessment revenue divided by 61.68

percent (i.e., 1.62 times the amount of assessment revenue). The remainder of the

assessment revenue is appropriated for other MA expenditures.

This bill imposes an assessment on the gross inpatient revenues of critical

access hospitals. The rate for the critical access hospital assessment is the same as

the rate of the current hospital assessment. The bill requires that DHS use a portion

of the critical access hospital assessment revenue to pay critical access hospitals for

services provided under MA. Like the current hospital assessment, the bill requires

that the MA payments to critical access hospitals from the critical access hospital

assessment revenue, together with the federal share of payments, equal the amount

of the critical access hospital assessment revenue divided by 61.68 percent. The bill

annually appropriates $1,000,000 of critical access hospital assessment revenue for

health care provider loans and rural physician residency assistance, described below.

The remainder of critical access hospital assessment revenue is appropriated for

other MA expenditures.

The provisions in the bill for payment to critical access hospitals under MA

apply to services provided beginning July 1, 2010. The first critical access hospital

assessment payments are due by September 30, 2010. The bill requires DHS to

submit a state Medicaid plan amendment to the federal government to implement

the critical access hospital assessment as provided for in the bill, and specifies that

if the federal government disapproves the state plan amendment, DHS must

discontinue the assessment on critical access hospitals and refund any critical access

hospital assessment revenue collected in fiscal year 2010-11.

Health care provider loan programs