The Tennessee House of Representatives passed legislation last week that enables hospitals to pay a coverage fee that will be used to fill a $659 million hole in the state’s Medicaid budget this year.
The bill now goes to Gov. Phil Bredesen for signature, and then to the Centers for Medicare and Medicaid Services for approval so that the state can begin to draw down federal matching funds before July 1, the start of Tennessee's next fiscal year.
The measure originally was proposed by the Tennessee Hospital Association's board of directors in February to avoid substantial Medicaid cuts to hospitals that would have impacted their patients and the communities they serve.
“This courageous act of leadership averts cuts that would have devastated the healthcare system in our state by placing limits on the number of times per year TennCare patients could see their physician, placing strict limits on lab and x‐ray procedures, creating unreasonable limits on reimbursement of inpatient hospital stays, limiting the number of outpatient visits per patient per year and completely eliminating occupational, speech and physical therapy services, as well as eliminating Tennessee’s graduate medical education program,” said Craig A. Becker, president and chief executive officer of the THA.
THA Chairman Jim Brexler, president of the Erlanger Health System in Chattanooga, Tenn., said the THA board unanimously approved the hospital coverage fee proposal.
“Hospitals are willing to temporarily 'step into the state’s shoes' to fund a significant portion of the TennCare program because we understand the state’s revenue crisis,” Brexler said. “The proposed cuts and limits to be placed on TennCare would have had a devastating impact on patients and hospitals.”
Under the legislation, licensed acute care and psychiatric hospitals will be assessed 3.52 percent of their net patient revenue, based on the most recent Medicare cost report. Government‐owned hospitals, critical access hospitals, freestanding rehabilitation hospitals and pediatric research hospitals are exempt from the fee.
The legislation prohibits hospitals from passing the one‐year fee on to their patients.
Twenty‐six other states have similar plans in place.
“Now we will all turn our attention toward CMS, with the hope that the final approval process will occur quickly. THA already is working closely with Tennessee’s Congressional delegation, the TennCare Bureau and CMS to see that happens,” Becker said. “Hospitals in our state currently provide almost $2.5 billion in uncompensated care annually and acting quickly will minimize additional burden on our state’s healthcare delivery system and the families it serves.”