LEGISLATIVE FISCAL ESTIMATE
[Third Reprint]
ASSEMBLY, No. 3364
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JULY 1, 2024
SUMMARY
Synopsis: Clarifies cap on fees imposed, and modifies definition of participating
county, under "County Option Hospital Fee Program Act."
Type of Impact: Annual expenditure and revenue increases to the State and certain
counties.
Agencies Affected: Department of Human Services, certain county governments.
Office of Legislative Services Estimate
Fiscal Impact Annual
State Revenue Increases – County Option Hospital Fee At least $607.2 million
State Revenue Increases – Federal Medicaid
Reimbursements At least $1.24 billion
State Expenditure Increases At least $1.84 billion
County Revenue Increases At least $667.3 million
County Expenditure Increases At least $607.2 million
 The Office of Legislative Services (OLS) concludes that this bill will produce an annual net
revenue gain for the State and certain county governments as a result of increasing the existing
cap on the fee a participating county can impose on a hospital from 2.5 percent to five percent
of a hospital’s total net patient revenues under the County Option Hospital Fee Program.
Increasing the cap will result in an additional $667.3 million in hospital fees collected under
the program.
 The OLS estimates that the $667.3 million in fee collections will generate $1.24 billion in
federal Medicaid cost reimbursements, for an estimated $1.91 billion in program revenues.
The revenue would be allocated as detailed in the table below.
 Additionally, the OLS finds that, in revising the definition of “participating county,” the bill
will expand eligibility under the County Option Hospital Fee Program thereby producing an
indeterminate annual net revenue gain to the program in the form of additional county hospital
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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fees and the federal Medicaid cost reimbursements received by the State due to those additional
fees. The net gain will primarily accrue to hospitals in counties newly eligible to participate in
the program under the bill.
 In their role as conduits, the State and participating counties, which included newly eligible
counties under the bill, will experience annual revenue and expenditure increases. These
impacts will largely offset one another, although the State and participating counties will
realize some net revenue gains from fees retained to cover their administrative costs.
BILL DESCRIPTION
This bill removes an existing requirement that the fee implemented under the County Option
Hospital Fee Program Act and imposed on applicable hospitals under the program be subject to a
cap as determined by the Department of Human Services. Rather, the bill mandates that the fee is
not to exceed the aggregate amount specified in 42 C.F.R. s.433.68(f)(3), which states that the
aggregate fee amount for health-care related taxes cannot exceed six percent of the provider’s total
net patient revenues, minus one percent of total net patient revenues. In doing so, the bill increases
the cap on this fee from 2.5 percent of a hospital’s total net patient revenues to five percent of a
hospital’s total net patient revenues.
The bill also revises the definition of “participating county” under the program. Under existing
law, a county is deemed a “participating county” via two pathways. This bill modifies a single
component of one of these pathways, providing that a “participating county” means a county that
contains a municipality with a population greater than 20,000, and with a Municipal Revitalization
Index Distress score, as last calculated by the New Jersey Department of Community Affairs prior
to the effective date of P.L.2018, c.136 (C.30:4D-7r et seq.), that exceeds 55. Under the current
law, the Municipal Revitalization Index Distress score must exceed 60.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that this bill will produce an annual net revenue gain for the State and
certain county governments as a result of increasing the existing cap on the fee a participating
county can impose on a hospital from 2.5 percent to five percent of a hospital’s total net patient
revenues under the County Option Hospital Fee Program. The OLS estimates that increasing the
cap will result in an additional $667.3 million in hospital fees paid to participating counties under
the program. The OLS estimates that the $667.3 million in fee collections will generate $1.24
billion in federal Medicaid cost reimbursements, for an estimated $1.91 billion in program
revenues. The revenue would be allocated as indicated in the table below.
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Estimated FY 2025 Collections and Net Resource Allocation of Increasing Cap on Hospital Fee:
County Option Hospital Fee Program
Revenue Net Allocation
Federal Medical
Fee Payments by Cost Total Program
Hospitals Reimbursements Revenue Hospitals * Counties State
$667,285,269 $1,239,244,071 $1,906,529,340 $1,172,515,544 $60,055,674 $6,772,853
* Net of $667.3 million in fee payments
Additionally, the OLS finds that, in revising the definition of “participating county,” the bill
will expand eligibility under the County Option Hospital Fee Program thereby producing an
indeterminate annual net revenue gain to the program in the form of additional county hospital
fees and the federal Medicaid cost reimbursements received by the State due to those additional
fees. The net gain will primarily accrue to hospitals in counties newly eligible to participate in the
program under the bill. For reference, according to the most recent program county cost reports,
annual hospital fees collected under the program at the current 2.5 percent cap ranged from a low
of $13.0 million in Cumberland County to ta high of $109.0 million in Bergen County.
The County Option Hospital Fee Program is a federal revenue maximization initiative that
provides support to local hospitals in designated high-need areas in order to ensure continued
access to critical healthcare services for vulnerable populations. To this end, the program
authorizes participating counties, and hospitals within those counties, to partner with the State
through a provider assessment fee imposed on hospitals that generates revenue used to enhance
financial support for the hospitals through increased federal Medicaid matching reimbursements.
All participating counties, except Ocean County, currently impose a fee that meets the current cap
of 2.5 percent of a hospital’s total net patient revenues.
As a function of the program, the net funding gain under the bill will primarily accrue to
hospitals. In their role as conduits, however, the State and participating counties, which includes
newly eligible counties under the bill, will experience annual revenue and expenditure increases.
These impacts will largely offset one another, although the State and participating counties will
realize some net gains in the form of fees retained to cover administrative costs. Specifically,
under the law, at least 90 percent of the fees collected must be used to benefit hospitals, with a
county required to transfer one percent of the fees to the State for administrative costs. Under this
provision, in practice and assumed under this estimate, a county retains nine percent and the State
retains one percent of the fees collected under the program to cover administrative costs.
For the purposes of this estimate, participating counties will realize increased revenue of $60.1
million under this bill, while the State will realize $6.8 million due to the provisions of the bill that
increase the cap a county can impose on hospitals from 2.5 percent to five percent of a hospital’s
total net patient revenues. Additional indeterminate program revenues will accrue due to the
provisions of the bill that expand the counties which can participate in the program. The County
Option Hospital Fee Program was established in November 2018. Current participating counties
are: Atlantic, Bergen, Burlington, Camden, Cumberland, Essex, Hudson, Mercer, Middlesex,
Monmouth, Ocean, and Passaic.
Section: Human Services
Analyst: Sarah Schmidt
Lead Research Analyst
Approved: Thomas Koenig
Legislative Budget and Finance Officer
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This legislative fiscal estimate has been produced by the Office of Legislative Services due to the
failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).


Statutes affected:
Introduced: 30:4D-7
Advance Law: 30:4D-7
Pamphlet Law: 30:4D-7