ON APRIL 15, 2024, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 1740, AS AMENDED.
AMENDMENT #1 rewrites the bill to, instead, establish the "Annual Coverage Assessment Act of 2024" ("act") as follows:
ANNUAL COVERAGE ASSESSMENT ON COVERED HOSPITALS
(1) Imposes on covered hospitals an annual coverage assessment for fiscal year (FY) 2024-2025 as set forth in the bill, such that the total assessment on all covered hospitals in the aggregate will be equal to 6 percent of the federally recognized annual coverage assessment base;
(2) Establishes that the annual coverage assessment imposed by the bill is not effective and validly imposed until the division of TennCare ("division") has provided the Tennessee Hospital Association with written notice that includes the following:
(A) A determination from the federal centers for medicare and medicaid (CMS) that the annual coverage assessment is a permissible source of revenue that does not adversely affect the amount of federal financial participation in the division; and
(B) Approval from CMS of an adjustment to the budget neutrality agreement with CMS, pursuant to the process set forth in the special terms and conditions in the division's 1115 demonstration project;
(C) Approval from CMS for the distribution of the full amount of directed payments to hospitals for TennCare services as long as an assessment installment is not collected prior to the distribution of the installment of the directed payments; or
(D) The rules promulgated by the division pursuant to § 71-5-2004(j)(2) [NOTE: THERE IS NO SUCH PROVISION IN THE BILL]; and
(E) Confirmation that all contracts between hospitals and managed care organizations comply with the hospital payment rate variation corridors;
PROCEEDS OF ANNUAL COVERAGE ASSESSMENT
(3) Establishes that the general assembly intends that the proceeds of the annual coverage assessment are not to be used as a justification to reduce or eliminate state funding to the division. The annual coverage assessment is not effective and validly imposed if the coverage or the amount of revenue available for expenditure by the division in FY 2024-2025 is less than (i) the governor's FY 2024-2025 recommended budget level; plus (ii) additional appropriations made by the general assembly to the division for FY 2024-2025, except to the extent new federal funding is available to replace funds that are appropriated as described in (i) and that are above the amount that the state receives from CMS under the regular federal matching assistance percentage;
(4) Establishes that the general assembly intends that the proceeds of the annual coverage assessment are not to be used as justification for a division managed care organization to implement across-the-board rate reductions to negotiated rates with covered or excluded hospitals or physicians in existence on July 1, 2024. For those rates in effect on July 1, 2024, the division must include provisions in the managed care organizations' contractor risk agreements that prohibit the managed care organizations from implementing across-the-board rate reductions to covered or excluded network hospitals or physicians by specific service, category, or type of provider. The requirements of the preceding sentence also apply to services or settings of care that are ancillary to the primary license of a covered or excluded hospital or physician, but do not apply to reductions in benefits or reimbursement for the ancillary services if the reductions (i) are different from those items being funded under the heading "Deposits in Maintenance of Coverage Trust Fund"; and (ii) have been communicated in advance of implementation to the general assembly and the Tennessee Hospital Association;
(5) As used under this heading, the following meanings apply:
(i) ''Physician'' includes a physician licensed under state law relative to medicine and surgery and osteopathic physicians, and a group practice of physicians that holds a contract with a managed care organization;
(ii) ''Services or settings of care that are ancillary'' includes ambulatory surgical facilities, free standing emergency departments, outpatient treatment clinics or imaging centers, dialysis centers, home health and related services, home infusion therapy services, outpatient rehabilitation, or skilled nursing services; and
(iii) ''Services or settings of care that are ancillary to the primary license of a covered or excluded hospital or physician'' include services where the physician or covered or excluded hospital, including a wholly owned subsidiary or controlled affiliate of a covered or excluded hospital or hospital system, holds more than a 50 percent controlling interest in the ancillary services or settings of care, but does not include other ancillary services or settings of care. For across-the-board rate reductions to ancillary services or settings of care, the division must include appropriate requirements for notice to providers in the managed care organizations' contractor risk agreements;
(6) Establishes that the provisions under this heading do not preclude good faith negotiations between managed care organizations and covered or excluded hospitals, hospital systems, and between managed care organizations and physicians on an individualized, case-by-case basis. The provisions under this heading do not serve as justification for managed care organizations, covered or excluded hospitals, hospital systems, or physicians to unreasonably deny a party the ability to enter into individualized, case-by-case good faith negotiations. Good faith negotiation necessarily implies mutual cooperation between the negotiating parties and may include, but is not limited to, the right to terminate contractual agreements; the ability to modify negotiated rates, pricing, or units of service; the ability to alter payment methodologies; and the ability to enforce existing managed care techniques or to implement new managed care techniques;
(7) The provisions under this heading do not preclude the full implementation of state law relative to hospital payment rate corridors;
(8) If CMS mandates a TennCare program change or a change is required by state or federal law that impacts rates, and that change is required to be implemented by the managed care organizations in accordance with their contracts, or if the annual coverage assessment becomes invalid, establishes that the bill does not prohibit the managed care organizations from implementing a rate change as may be mandated by the division or by state or federal law;
AMOUNT OF ANNUAL COVERAGE ASSESSMENT - PAYMENT - PENALTY - SUSPENSION OF PAYMENTS - CIVIL ACTION
(9) Establishes that each covered hospital's annual assessment is a weighted portion of the annual coverage assessment base as determined under state law. The weight for each covered hospital must be determined in accordance with the hospital's classification for children's, tier 1, tier 2, tier 3, psychiatric, and safety net hospitals in the division DSH program. The weights determined pursuant to (9) are not a rule and are not subject to rulemaking. The division must implement the provisions under this heading in a manner that complies with federal requirements necessary to ensure that the assessment qualifies for federal matching funds. The weights for:
(A) Children's hospitals are an inpatient weight of 0.8 and an outpatient weight of 0.3;
(B) Tier 1 hospitals are an inpatient weight of 1.0 and an outpatient weight of 0.55;
(C) Tier 2 hospitals are an inpatient weight of 0.75 and an outpatient weight of 0.3;
(D) Tier 3 hospitals are an inpatient weight of 0.15 and an outpatient weight of 0.175;
(E) Psychiatric hospitals are an inpatient weight of 0.11 and an outpatient weight of 1.0;
(F) Safety net hospitals are an inpatient weight of 0.133 and an outpatient weight of 0.157; and
(G) Any other hospitals eligible for the assessment have a weight of 6 percent;
(10) Authorizes the division to, in consultation with the Tennessee Hospital Association, modify the amount of the individual percentages set forth in (9) if necessary to comply with federal regulations or to address additional state appropriations;
(11) The annual coverage assessment must be paid in installments if the requirements of (2) above have been satisfied. The division must establish a schedule of four equal installment payments spread as evenly as possible throughout FY 2024-2025 with each installment payment due 15 days after the FY 2024-2025 directed payments approved by CMS to offset unreimbursed division costs have been made to hospitals;
(12) To facilitate collection of the annual coverage assessment, requires the division to send each covered hospital, at least 30 days in advance of each installment payment due date, a notice of payment along with a return form developed by the division. Failure of a covered hospital to receive a notice and return form, however, does not relieve a covered hospital from the obligation of timely payment. The division must also post the return form on its website;
(13) Establishes that the failure of a covered hospital to pay an installment of the annual coverage assessment, when due, results in an imposition of a penalty of $500 per day until the installment is paid in full. The division at its discretion may waive the penalty if the hospital establishes that it attempted to mail or electronically transfer payment to the state on or before the date the payment was due;
(14) If a covered hospital ceases to operate or changes status to be an excluded hospital between July 1, 2024, and June 30, 2025, establishes that the hospital's total annual coverage assessment is equal to its annual coverage assessment base multiplied by a fraction, the denominator of which is the number of calendar days from July 1, 2024, until July 1, 2025, and the numerator of which is the number of days from July 1, 2024, until the date the health facilities commission has recorded as the date that the hospital changed status or ceased operation;
(15) If a covered hospital ceases operation prior to payment of its full annual coverage assessment, establishes that the person controlling the hospital as of the date the hospital ceased operation is jointly and severally responsible for any remaining annual coverage assessment installments and unpaid penalties associated with previous late payments;
(16) If a covered hospital is sold after July 1, 2024, and before July 1, 2025, establishes that the seller is responsible for annual coverage assessment payments due for the period up to and including the date the sale is final. If the hospital continues to operate in this state and continues to meet the definition of a covered hospital, then the new owner is responsible for paying all coverage assessment amounts due for the period beginning on the day after the date of the sale until July 1, 2025;
(17) If a covered hospital fails to pay an installment of the annual coverage assessment within 30 days of its due date, requires the division to suspend the payments to the hospital required by state law until the installment is paid and report the failure to the department that licenses the covered hospital. Failure of a covered hospital to pay an installment of the annual coverage assessment or a refund required by the bill is considered a license deficiency and grounds for disciplinary action as set forth in the statutes and rules under which the covered hospital is licensed;
(18) In addition to the action required by (16) above, the division is authorized to file a civil action against a covered hospital and its controlling person or persons to collect delinquent annual coverage assessment installments, late penalties, and refund obligations established by the bill. Exclusive jurisdiction and venue for a civil action authorized by this (18) is in the chancery court for Davidson County;
(19) If a federal agency with jurisdiction over the annual coverage assessment determines that the annual coverage assessment is not a valid source of revenue or if there is a reduction of the coverage and funding of the division's program, or if the requirements related to hospital payment rate corridors are not fully satisfied, or if one or more managed care organizations impose rate reductions, then (i) subsequent installments of the annual coverage assessment are not due and payable; and (ii) further payments must not be paid to hospitals after the date of the event;
(20) If CMS discontinues approval of or otherwise fails to approve the full amount of directed payments to hospitals for providing services to division enrollees, requires the division to suspend payments from or to covered hospitals otherwise required by the bill and must promulgate rules that (i) establish the methodology for determining the amounts, categories, and times of payments to hospitals, if any, instead of the payments that otherwise would have been paid under the bill if approved by CMS; (ii) prioritize payments to hospitals; (iii) identify the benefits and services for which funds will be available in order to mitigate reductions or eliminations that otherwise would be imposed in the absence of the coverage assessment; (iv) determine the amount and timing of payments for benefits and services identified under (20)(ii) and (iii), as appropriate; (v) reinstitute payments from or to covered hospitals as appropriate; and (vi) otherwise achieve the goals of this (20);
(21) Requires that the rules adopted under (20) above, to the extent possible, achieve the goals of (i) maximizing the amount of federal matching funds available for the division's program; and (ii) minimizing the variation between payments hospitals will receive under the rules as compared to payments hospitals would have received if CMS had approved the total payments described in the bill;
(22) Authorizes the divisions to exercise emergency rulemaking authority to the extent necessary to meet the objectives of (20) and (21) above;
(23) Upon occurrence of an event set forth in (19)-(21) above, authorizes the division to make necessary changes to the division's budget to account for the loss of annual coverage assessment revenue;
(24) Authorizes a covered hospital or an association representing covered hospitals, the membership of which includes 30 or more covered hospitals, to file a petition for declaratory order to determine if there has been a failure to meet the requirements of the bill. A covered hospital must not increase charges or add a surcharge based on, or as a result of, the annual coverage assessment;
DEPOSITS IN MAINTENANCE OF COVERAGE TRUST FUND - EXPENDITURES - REPORTS
(25) Requires that the funds generated as a result of the bill be deposited in the maintenance of coverage trust fund, the existence of which is continued as provided in (26) below. The fund must not be used to replace monies otherwise appropriated to the division's program by the general assembly or to replace monies appropriated outside of the division's program;
(26) Requires that the maintenance of coverage trust fund continue without interruption and be operated in accordance with state law and the provisions under this heading;
(27) Establishes that the maintenance of coverage trust fund consists of (i) the balance of the trust fund remaining as of June 30, 2024; (ii) all annual coverage assessments received by the division; (iii) investment earnings credited to the assets of the maintenance of coverage trust fund; (iv) penalties paid by covered hospitals for late payment of assessment installments imposed by the bill or a prior statute authorizing an annual coverage assessment; and (v) intergovernmental transfer of funds from hospitals determined by the division as eligible to certify public expenditures for the purpose of securing federal medical assistance percentage payments up to $300 million;
(28) Requires that monies credited or deposited to the maintenance of coverage trust fund, together with all federal matching funds, be available to and used by the division only for expenditures in the division's program and include the following purposes:
[Effective Upon Becoming Law]
(A) In addition to expenditures otherwise authorized by this (28), payments to hospitals for uncompensated care in providing services to division enrollees, the state portion of which will be up to $7,593,300; and
(B) Administrative funding to the division for six full-time state employees to assist with implementation, operationalization, and ongoing management of hospital payment programs in the amount of $382,400;
[Effective June 30, 2024, at 11:59 p.m.]
(C) Expenditures for benefits and services under the division's program, including those that would have been subject to reduction or elimination from the division's funding for FY 2024-2025, except for the availability of one-time funding for that year only, as follows:
(i) Replacement of across-the-board reductions in covered and excluded hospital and professional reimbursement rates described in the governor's recommended budgets since FY 2011, except for reductions that were included on a list for a given year but then funded in a subsequent year with recurring state dollars;
(ii) Funding virtual DSH payments, funding payments to hospitals for uncompensated care to charity patients, and funding payments to hospitals for quality incentive arrangements, with all of those payments being made in accordance with, and as those categories of payments are defined in, the division's 1115 demonstration waiver from CMS to the maximum amount permitted for each category under that waiver;
(iii) Maintenance of payments for graduate medical education of at least $48 million;
(iv) Unless otherwise addressed in a separate appropriation for FY 2024-2025, maintenance of reimbursement for medicare part A crossover claims at the lesser of 100 percent of medicare allowable or the billed amount;
(v) Avoidance of coverage limitations relative to the number of hospital inpatient days per year or the annual cost of hospital services for a division enrollee;
(vi) Avoidance of coverage limitations relative to the number of nonemergency outpatient visits per year for a division enrollee;
(vii) Avoidance of coverage limitations relative to the number of physician office visits per year for a division enrollee;
(viii) Avoidance of coverage limitations relative to the number of laboratory and diagnostic imaging encounters per year for a division enrollee;
(ix) Maintenance of coverage for occupational therapy, physical therapy, and speech therapy services;
(x) In the total amount of $590,770 to maintain reimbursement at the same emergency care rate as in FY 2023-2024 for nonemergent care to children aged 12 to 24 months;
(xi) In the total amount of $2,111,400 to the division to offset the elimination of the provision in the division's managed care contractor risk agreements for hospitals as follows: CRA 2.12.9.60-Specify in applicable provider agreements that all providers who participate in the federal 340B program give the division MCOs the benefit of 340B pricing; however, if the division obtains approval from CMS for the adjustment to