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Proposed Ordinance Regarding Hernando County Local Provider Participation Fund Ordinance; Amending Chapter 15, Article II
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BRIEF OVERVIEW
The proposed ordinance, if enacted, will amend Hernando County Code Chapter 15, Article II, “Hernando County Local Provider Participation Fund,” to conform it to recent changes in federal law.
Scope
On August 24, 2021, the Board enacted Ordinance 2021-16, codified at Hernando County Code Ch. 15, Art. II (the “LPPF Ordinance”), which authorizes, but does not require, the Board to impose, levy, collect, and enforce a special assessment against private for-profit or not-for-profit hospitals that provide inpatient hospital services within the County. While the special assessment that the ordinance authorizes is technically “countywide,” the assessments are only levied against hospitals and their respective properties.
Like the LPPF Ordinance, this amendment has been requested by the owners and operators of Hernando County’s hospitals.
Background
Medicaid is a joint federal-state health insurance program that provides medical coverage to a low-income population consisting of children, pregnant women, people over 65, and individuals with disabilities. See 42 U.S.C. § 1396, et seq. Although the program is administered by the states, Medicaid is jointly funded by states and the federal government through federal matching of state funds. See 42 U.S.C. § 1396b. State general revenue comprises a large share of the funds receiving a federal match.
Other forms of revenue collection, however, also qualify for matching. For example, local governments can collect funds and use intergovernmental transfers (IGTs) to send those funds to the state for federal matching. See Social Security Act § 1902(a)(2); 42 CFR § 433.51. IGTs have the advantage of increasing the magnitude of federal spending without a commensurate increase in state general revenue spending. So long as the collection of funds and these IGTs comply with federal rules, they are eligible for federal match. See Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991, PL 102-234, December 12, 1991, 105 Stat. 1793; Social Security Act § 1903(w).
Medicaid payments funded by federal matching serve a vital public purpose. Hospitals that provide Medicaid services or other forms of indigent care often fail to receive full compensation for those services. Indeed, the Florida Hospital Association estimated in 2021 that Medicaid reimbursement equates to approximately 66 percent of total procedure costs, leaving hospitals with 34 percent of costs unreimbursed. This gap, known as the “Medicaid shortfall,” results in at least $2.3 billion in uncompensated Medicaid costs incurred by Florida hospitals each year.
In Hernando County, the problem is dire. Hospitals in Hernando County annually provide millions of dollars-worth of uncompensated care to persons who qualify for Medicaid because Medicaid, on average, covers only 60% of the costs of the health care services provided by hospitals to Medicaid-eligible persons. This reimbursement shortfall leaves hospitals with significant uncompensated costs. Estimates show that Hernando County hospitals incur approximately $14 million in unreimbursed Medicaid-service costs each year. As a result, the County’s hospitals are continuing to volunteer to take on financial obligations to support the non-federal share of a Medicaid managed care supplemental payment initiative to mitigate these unreimbursed costs.
On April 26, 2021, the federal Centers for Medicare & Medicaid Services (CMS) approved a pre-print application submitted by AHCA, the State Medicaid agency, for a new payment program to provide direct federal payments to local hospitals. This directed payment program provided a uniform increase in Medicaid managed care rates for Florida hospitals that deliver certain inpatient and outpatient services. This increase addressed the Medicaid shortfall faced by each hospital in Florida. The funds received through the program help offset the uncompensated Medicaid costs that the County’s hospitals incur each year. To succeed, the program requires the State to contribute a non-federal share that will be eligible for federal match.
The LPPF authorizes the Board to impose a special assessment on the eligible hospitals, a form of permissible provider tax. See 42 CFR § 433.55 (“A health care-related tax is a licensing fee, assessment, or other special assessment …”). From the federal perspective, such payments qualify for federal match because they are mandatory, broad based, and uniformly imposed on hospitals in the jurisdiction. See 42 CFR § 433.68.
The Board has levied the LPPF each year since 2021. The County collects the special assessments eligible for federal matching and remits such funds through intergovernmental transfers. That service unlocks directed payment program funds from the federal government that would be unavailable if the County did not provide this service. The resultant subsidy benefits Hernando County hospital properties through enhanced Medicaid payments pursuant to an agreement between the County and AHCA.
Need for Proposed Amendment
The proposed ordinance, if enacted, will make purely technical amendments to the LPPF Ordinance to bring it into compliance with recent changes in the Florida Medicaid State Directed Payments program that the state has implemented to conform to federal law changes that were made by the One Big Beautiful Bill Act (OBBBA).
STRATEGIC PLAN INITIATIVES
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FINANCIAL IMPACT
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LEGAL NOTE
The Board is authorized to enact the proposed ordinance pursuant to Fla. Stat. § 125.01 and 42 CFR §§ 433.55 and 433.68.
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RECOMMENDATION
Following any public comment, the Board should deliberate the merits of the proposed ordinance and if determined that the ordinance is beneficial to the health, welfare, and safety of its citizens, vote to adopt it.