2006 Legislation
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SENATE BILL NO. 1486 – Idaho Hospital Contribution Act


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Bill Status

S1486................................................by JUDICIARY AND RULES
IDAHO HOSPITAL CONTRIBUTION ACT - Adds to existing law relating to
hospitals to provide for the Idaho Hospital Contribution Act; to set forth
legislative intent; to define terms; to establish the hospital contribution
fund; to provide for contributions; to provide for a review of the annual
contribution amount; to provide for inpatient and outpatient adjustment
payments; to provide for timing of payments and contributions; to provide
an exception; to provide for multi-hospital locations, hospital closures
and new hospitals; and to provide applicability.
03/28    Senate intro - 1st rdg - to printing
03/29    Rpt prt - to Jud

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                       IN THE SENATE
                                    SENATE BILL NO. 1486
                              BY JUDICIARY AND RULES COMMITTEE
  1                                        AN ACT
 11    Be It Enacted by the Legislature of the State of Idaho:
 12        SECTION 1.  That Title 56, Idaho Code, be, and the same is hereby  amended
 13    by  the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
 14    ter 14, Title 56, Idaho Code, and to read as follows:
 15                                      CHAPTER 14
 16                           IDAHO HOSPITAL CONTRIBUTION ACT
 17        56-1401.  SHORT TITLE -- LEGISLATIVE INTENT. (1)  This  chapter  shall  be
 18    known and may be cited as the "Idaho Hospital Contribution Act."
 19        (2)  It  is the intent of the legislature to encourage the maximization of
 20    financial resources eligible and available for medicaid services by establish-
 21    ing a fund within the Idaho department of health and welfare to  receive  pri-
 22    vate  hospital  contributions  to use in securing federal matching funds under
 23    federally prescribed upper payment limit programs available through the  state
 24    medicaid plan.
 25        56-1402.  DEFINITIONS. As used in this chapter:
 26        (1)  "Governmental  entity" means and includes the state and its political
 27    subdivisions.
 28        (2)  "Hospital" is as defined in section 39-1301(a), Idaho Code.
 29        (3)  "Political subdivision" means a county, city,  municipal  corporation
 30    or  hospital taxing district and, as used in this chapter, shall include state
 31    licensed hospitals established by counties pursuant to chapter 36,  title  31,
 32    Idaho  Code,  or  jointly by cities and counties pursuant to chapter 37, title
 33    31, Idaho Code.
 34        (4)  "Upper payment limit" means a limitation established by federal regu-
 35    lations, 42 CFR 447.272 and 42 CFR 447.321, that  disallows  federal  matching
 36    funds  when state medicaid agencies pay certain classes of hospitals an aggre-
 37    gate amount for inpatient and outpatient hospital services that  would  exceed
 38    the amount that would be paid for the same services furnished by that class of
 39    hospitals under medicare payment principles.
 40        56-1403.  HOSPITAL CONTRIBUTION FUND ESTABLISHED. (1) There is hereby cre-
  1    ated  in the office of the state treasurer a dedicated fund to be known as the
  2    hospital contribution fund, hereinafter "fund,"  to  be  administered  by  the
  3    department  of  health  and welfare, hereinafter "department." The state trea-
  4    surer shall invest idle moneys in the fund and any interest received on  those
  5    investments shall be returned to the fund.
  6        (2)  Moneys in the fund shall consist of:
  7        (a)  All moneys collected or received by the department from hospital con-
  8        tributions required by this chapter;
  9        (b)  All  federal matching funds received by the department as a result of
 10        expenditures made by the department that are attributable to moneys depos-
 11        ited in the fund;
 12        (c)  Any interest or penalties levied in conjunction with the  administra-
 13        tion of this chapter; and
 14        (d)  Any  appropriations,  federal  funds, donations, gifts or moneys from
 15        any other sources.
 16        (3)  The fund is created for the purpose of receiving moneys in accordance
 17    with this section and section 56-1404, Idaho Code. The fund shall not be  used
 18    to  replace any moneys appropriated to the Idaho medical assistance program by
 19    the legislature. Moneys in the fund shall be  distributed  by  the  department
 20    subject to appropriation for the following purposes only:
 21        (a)  Payments  to  hospitals  as required under Idaho's medical assistance
 22        program as set forth in section 56-209b, Idaho Code, et seq.;
 23        (b)  Reimbursement of moneys collected by the  department  from  hospitals
 24        through  error  or  mistake  in performing the activities authorized under
 25        Idaho's medical assistance program;
 26        (c)  Payments of administrative expenses incurred by the department or its
 27        agent in performing the activities authorized by this chapter;
 28        (d)  Payments of any amounts which are reimbursable to the federal govern-
 29        ment for payments from the fund which are required to  be  paid  by  state
 30        warrant;
 31        (e)  Transfers  to  any  other  fund  in the state treasury, provided such
 32        transfers shall not exceed the amount  transferred  previously  from  that
 33        other fund into the hospital contribution fund; and
 34        (f)  Making refunds to hospitals pursuant to section 56-1410, Idaho Code.
 35        56-1404.  CONTRIBUTIONS.  (1)  Subject  to section 56-1410, Idaho Code, an
 36    annual contribution on both inpatient and outpatient  services  is  determined
 37    for each qualifying hospital for state fiscal years 2007, 2008 and 2009, in an
 38    amount  calculated  by multiplying the rate, as set forth in subsection (3) of
 39    this section, by the contribution base, as set forth in subsection (4) of this
 40    section.
 41        (2)  The department shall calculate the  private  hospital  upper  payment
 42    limit  gap for both inpatient and outpatient services. The upper payment limit
 43    gap is the difference between the maximum allowable payments eligible for fed-
 44    eral match less medicaid payments not  financed  using  provider  contribution
 45    funds. The upper payment limit gap shall be calculated separately for hospital
 46    inpatient  and  outpatient  services. Medicaid disproportionate share payments
 47    shall be excluded from the calculation.
 48        (3)  The contribution rate for state fiscal year 2007 shall be .6612  per-
 49    cent.  For  subsequent  years, the rate shall be increased by two and one-half
 50    percent (2.5%) annually.
 51        (4)  The contribution base shall be the hospital's net patient revenue for
 52    the applicable period as follows:
 53        (a)  "Net patient revenue" shall be determined using the most recent  data
 54        available  from  each  hospital's fiscal year 2002 medicare cost report on
  1        file with the department on June 30, 2006, without regard  to  any  subse-
  2        quent  adjustments  or  changes  to such data. If a hospital's fiscal year
  3        2002 medicare cost report is not available, the hospital    shall  furnish
  4        such  cost report or the data necessary to determine its net patient reve-
  5        nue as required by department rule;
  6        (b)  Net patient revenue is reported on worksheet "G-3" column 1,  line  3
  7        of the medicare cost report;
  8        (c)  If  the hospital was not in operation during all of fiscal year 2002,
  9        the department shall utilize the medicare cost report from the first  full
 10        year of operation.
 11        56-1405.  REVIEW  OF  ANNUAL  CONTRIBUTION AMOUNT. Each state fiscal year,
 12    hospitals shall have at least thirty (30)  days  prior  to  implementation  to
 13    review  and verify the contribution base, rate, and the estimated contribution
 14    amount. The contribution amount shall not exceed three  percent  (3%)  of  the
 15    hospital's net patient revenue.
 16        56-1406.  INPATIENT  AND  OUTPATIENT  ADJUSTMENT  PAYMENTS.  All hospitals
 17    required to make provider contributions under  section  56-1404,  Idaho  Code,
 18    shall be eligible for inpatient and outpatient adjustments as follows:
 19        (1)  For state fiscal year 2007, the inpatient upper payment limit gap for
 20    qualifying  hospitals shall be divided by medicaid inpatient days for the same
 21    class of Idaho hospitals from calendar year 2005 to establish an  average  per
 22    diem adjustment rate. Each qualifying hospital shall receive an annual payment
 23    that is equal to the average per diem adjustment rate multiplied by the hospi-
 24    tals'  calendar  year  2005 medicaid inpatient days. For purposes of this sec-
 25    tion, "hospital medicaid inpatient days" are days of inpatient hospitalization
 26    paid for by the Idaho medical assistance program for the  applicable  calendar
 27    year.  For  fiscal  year  2008, calendar year 2006 inpatient hospital medicaid
 28    days shall be utilized to determine the hospital inpatient adjustment payment.
 29    For state fiscal year 2009, calendar year  2007  hospital  medicaid  inpatient
 30    days shall be utilized to determine the hospital inpatient adjustment payment.
 31    In  the event that either the inpatient upper payment limit gap for qualifying
 32    hospitals or the available hospital contribution funding is lower than antici-
 33    pated, the department shall apply an across-the-board  factor  such  that  the
 34    inpatient  payment  adjustments are maximized, financed entirely from hospital
 35    contribution funding, and do not exceed  the  Idaho  inpatient  upper  payment
 36    limit for qualifying hospitals. Payments shall be made no later than seven (7)
 37    days  after  the  due date for the provider contributions set forth in section
 38    56-1404, Idaho Code.
 39        (2)  For state fiscal year 2007, the outpatient upper  payment  limit  gap
 40    for  qualifying  hospitals  shall  be  divided by medicaid outpatient hospital
 41    reimbursement for the same class of Idaho hospitals from calendar year 2005 to
 42    establish an average percentage  adjustment  rate.  Each  qualifying  hospital
 43    shall  receive  an  annual  payment  that  is  equal to the average percentage
 44    adjustment rate multiplied by the hospital's calendar year 2005 hospital  med-
 45    icaid outpatient reimbursement. For purposes of this section, "hospital outpa-
 46    tient  reimbursement"  is  reimbursement for hospital outpatient services paid
 47    for by the Idaho medical assistance program for the applicable calendar  year.
 48    For  state  fiscal  year 2008, calendar year 2006 hospital medicaid outpatient
 49    reimbursement shall be utilized to determine the outpatient  hospital  adjust-
 50    ment payment. For state fiscal year 2009, calendar year 2007 hospital medicaid
 51    outpatient  reimbursement shall be utilized to determine the outpatient hospi-
 52    tal adjustment payment. In the event that either the outpatient upper  payment
 53    limit  gap  for  qualifying  hospitals  or the available hospital contribution
  1    funding is lower than anticipated, the department shall apply  an  across-the-
  2    board  factor such that outpatient adjustment payments are maximized, financed
  3    entirely from hospital contribution funding, and do not exceed the Idaho  out-
  4    patient  upper  payment limit for qualifying hospitals. Payments shall be made
  5    no later than seven (7) days after the due date for the hospital contributions
  6    set forth in section 54-1404, Idaho Code.
  7        56-1407.  TIMING OF PAYMENTS AND CONTRIBUTIONS. (1) The  department  shall
  8    establish an annual payment schedule for all payments created under this chap-
  9    ter.
 10        (2)  If  a  hospital  fails  to pay the full amount of an installment when
 11    due, including any extensions granted, there shall be added to  the  contribu-
 12    tion  imposed  by section 56-1404, Idaho Code, unless waived by the department
 13    for reasonable cause, a penalty equal to the lesser of:
 14        (a)  An amount equal to five percent (5%) of the contribution  installment
 15        amount  not  paid on or before the due date, plus five percent (5%) of the
 16        portion thereof remaining unpaid on the last day of each month thereafter;
 17        or
 18        (b)  An amount equal to one hundred percent  (100%)  of  the  contribution
 19        installment amount not paid on or before the due date.
 20        (3)  For  purposes  of  subsection  (2) of this section, payments shall be
 21    credited first to unpaid installment amounts rather than to penalty or  inter-
 22    est amounts, beginning with the most delinquent installment.
 23        56-1408.  EXCEPTION. A hospital that is a governmental entity, including a
 24    state  agency,  is  exempt  from the contribution required by section 56-1404,
 25    Idaho Code, unless the exemption is adjudged to be unconstitutional or  other-
 26    wise invalid, in which case the hospital shall pay such contribution.
 28    (1) If a hospital conducts, operates or maintains more than one  (1)  hospital
 29    licensed  by  the department, the hospital shall pay the contribution for each
 30    hospital separately.
 31        (2)  A hospital subject to contributions under this chapter that ceases to
 32    conduct hospital operations or maintain its state license, commences  hospital
 33    operations  during  a  fiscal  year,  or  did  not conduct hospital operations
 34    throughout a calendar or fiscal year, shall  have  its  required  contribution
 35    adjusted by multiplying the contribution computed under section 56-1404, Idaho
 36    Code,  by a fraction, the numerator of which is the number of days in the year
 37    during which the hospital conducts hospital business, operates a hospital  and
 38    maintains  licensure, and the denominator of which is three hundred sixty-five
 39    (365). The hospital shall pay the required contribution computed under section
 40    56-1404, Idaho Code, on the date and in pro rata installments as  required  by
 41    the department for that portion of the state fiscal year during which the hos-
 42    pital  operated  and  maintained state licensure, to the extent not previously
 43    paid.
 44        56-1410.  APPLICABILITY. (1) The contribution required by section 56-1404,
 45    Idaho Code, shall not take effect or shall cease to be imposed, and any moneys
 46    remaining in the fund shall be refunded to  hospitals  in  proportion  to  the
 47    amounts paid by such hospitals if:
 48        (a)  The appropriation for each state fiscal year 2007, 2008 and 2009 from
 49        the  general fund for hospital payments under the Idaho medical assistance
 50        program is less than for fiscal year 2006;
 51        (b)  The department makes changes in its rules that  reduce  the  hospital
  1        inpatient    or  outpatient  payment  rates,  including adjustment payment
  2        rates, in effect on January 1, 2006; or
  3        (c)  The payments to hospitals required under  section  56-1403(3),  Idaho
  4        Code, are changed or are not eligible for federal matching funds under the
  5        Idaho medical assistance program.
  6        (2)  The  contribution  required by section 56-1404, Idaho Code, shall not
  7    take effect or shall cease to be required if the contribution is determined to
  8    be impermissible under title XIX of the social security  act.  Moneys  in  the
  9    fund  derived  from contributions required prior thereto shall be disbursed in
 10    accordance with section 56-1403(3), Idaho Code, to the extent federal matching
 11    is not reduced due to the  impermissibility  of  the  contributions,  and  any
 12    remaining  moneys  shall be refunded to hospitals in proportion to the amounts
 13    paid by such hospitals.
 14        SECTION 2.  The provisions of Section 1 of this act shall  be  null,  void
 15    and of no force and effect on and after July 1, 2009.

Statement of Purpose / Fiscal Impact

                       STATEMENT OF PURPOSE

                             RS 16289

The purpose of this legislation is to leverage federal Medicaid
dollars by having private hospitals contribute to the state the
amount necessary to match the federal dollars.  With an
approximate match rate of 70% federal dollars to 30% state
dollars, existing below-cost reimbursement to hospitals can be
enhanced, thereby reducing the losses hospitals incur when they
treat Medicaid patients.  For this to be permissible under
federal law and regulation, the hospital contribution must be

This legislation creates a hospital contribution fund to collect
the contributions and the funds are then used as the state match
to access the federal dollars.  When the federal funds are
secured, they are paid to the contributing hospitals based upon
the number of Medicaid patients they care for within a given

This type of mechanism is allowable under federal regulations
which set a limitation, called the "upper payment limit (UPL),"
on how much state Medicaid programs can reimburse hospitals. 
Simply put, the limit is the amount Medicare would have paid for
the same services.  In Idaho, like most states, Medicaid
reimburses hospitals less than Medicare does, thus creating a
"gap" in what is reimbursed compared to what could be reimbursed. 
To increase reimbursement to hospitals, the state would need to
appropriate additional dollars to draw down the federal dollars. 
This legislation increases reimbursement to private hospitals by
having them put up the matching dollars instead of the state.

                           FISCAL NOTE

There is no fiscal impact on the general fund.

Name: Steve Millard, Idaho Hospital Association 
Phone: (208) 338-5100

STATEMENT OF PURPOSE/FISCAL NOTE                           S 1486