OLR Bill Analysis

sHB 5588

AN ACT CONCERNING THE TIMING OF PAYMENTS FROM SUPPLEMENTAL INPATIENT PAYMENT POOLS FOR SHORT-TERM GENERAL HOSPITALS.

SUMMARY:

This bill requires the Department of Social Services (DSS), within available appropriations, to make quarterly Medicaid supplemental payments to hospitals and allows hospitals to deduct unpaid supplemental payments from the amount they owe in quarterly provider taxes. Federal law allows states to make supplemental Medicaid payments to hospitals and receive federal reimbursement for doing so (see BACKGROUND).

The bill requires DSS to establish, within available appropriations, one supplemental inpatient payment pool for all hospitals and one such pool for certain small independent hospitals. It eliminates a provision allowing DSS to establish a supplemental inpatient pool for certain hospitals. In practice, this pool funds supplemental payments to unaffiliated small hospitals with less than 180 licensed beds. The bill prohibits funds in the supplemental pools from being diverted to any other state use.

It also makes conforming changes.

EFFECTIVE DATE: July 1, 2016

SUPPLEMENTAL INPATIENT PAYMENT POOLS

Payments and Exceptions

The bill prohibits DSS from making supplemental pool payments to (1) any hospital classified by the Department of Public Health as a children's general hospital beginning July 1, 2016 or (2) state-operated short-term acute care hospitals other than those operated by the state as receiver.

Under the bill, supplemental pool payments are in addition to hospital Medicaid payments based on inpatient rates established in statute and do not replace such payments.

Payment Schedule

The bill requires the DSS commissioner to make quarterly supplemental pool payments to all eligible hospitals before the last day of the second month of each quarter. A hospital's quarterly payment must equal one-quarter of the hospital's total allocated portion of that year's applicable supplemental pool. The bill requires the DSS commissioner to seek federal matching funds under the medical assistance program for quarterly payments after issuing them (see BACKGROUND). It requires interest earned on funds in the supplemental inpatient payment pools to be credited to the pools.

HOSPITAL TAX DEDUCTIONS

The bill allows a hospital to deduct unpaid supplemental payments from the amount it owes for each quarterly provider tax payment (see BACKGROUND). Under the bill, the allowable deduction is for the full amount of the supplemental payment, including the state and federal share, from supplemental pools required by the bill and any other hospital payment pool established by the General Assembly that receives any funding from hospital tax payments. The bill allows the hospital to make the deduction for that quarter or any preceding quarter. The bill subtracts deductions from the tax amount hospitals must pay to avoid a penalty.

By law, the Department of Revenue Services (DRS) commissioner must notify the DSS commissioner when hospitals are delinquent on their provider tax. The law requires the DSS commissioner to deduct and withhold delinquent amounts from other payments owed by DSS to the delinquent hospital. The bill prohibits the DSS commissioner from deducting or withholding any amounts based on deductions hospitals make to their provider taxes for unpaid supplemental payments.

BACKGROUND

Supplemental Medicaid Payments to Hospitals

Federal Medicaid law requires states to reimburse health care providers at a rate that ensures efficiency and economy (42 U.S.C. 1396a(30)(A)). While states have some discretion in how they construct their payments, the Upper Payment Limit (UPL), as specified in federal regulations, limits payments to hospitals and certain other institutional providers by prohibiting federal matching funds for payments in excess of a total based on what Medicare would pay for comparable services. Because the regulations allow federal matching payments up to the UPL, states may make supplemental payments to hospitals based on the difference between the state's regular Medicaid payments for hospital services and the UPL.

Generally, DSS specifies the allocation and eligibility for supplemental payments through Medicaid state plan amendments, which must be submitted to and approved by the federal Centers for Medicare and Medicaid Services.

Federal Matching Funds for Supplemental Payments

State Medicaid programs generally receive federal reimbursement (i.e., federal medical assistance percentage or FMAP) at a rate based on the state's per capita income. Connecticut's regular FMAP is 50%, but certain payments under the federal Affordable Care Act are reimbursed at an enhanced FMAP that can be up to 100%. The amount of the federal reimbursement for supplemental payments is a blended rate, generally between the state's regular FMAP and an enhanced FMAP. For FY 16, it was approximately 66%.

Hospital Provider Tax

Connecticut's hospital tax applies to all short-term general hospitals except the Connecticut Children's Medical Center and John Dempsey Hospital. The tax is based on a hospital's net patient revenue (defined as the amount of accrued payments a hospital earned for providing inpatient and outpatient services).

The rate, set by DSS, is currently set at 6% of all net patient revenue. By law, the DSS commissioner must determine the base year on which the tax will be assessed.

Hospitals must file their hospital tax returns and pay the tax quarterly to DRS. Late filers are subject to a penalty of 10% of the tax due or $50, whichever is greater, plus interest of 1% per month.

COMMITTEE ACTION

Human Services Committee

Joint Favorable Substitute

Yea

17

Nay

0

(03/17/2016)