Arizona Health Care Cost Containment System Overview of Hospital Assessment Programs April 4, 2013

1. Arizona Health Care Cost Containment SystemOverview of Hospital Assessment ProgramsApril 4, 2013

2. Provider Assessments - Overview • Provider Assessment Programs • Oftentimes used by states to replace or supplement the state share of payments eligible for federal matching funds • Defined under federal regulations as a licensing fee, assessment or other mandatory payment related to heatlhcare items or services • Assessment is considered to be related to healthcare if at least 85% of the burden of the assessment revenue falls on healthcare providers • Many classes of healthcare services can be assessed using a healthcare-related tax, including hospital services

3. Provider Assessments - Overview Simple Example of How Provider Assessment Programs Work CMS State Draws $50 in FFP State Certifies $100 Payments State Medicaid Program Healthcare Service Providers State Collects $50 in Assessments State Makes Payments of $100

4. Provider Assessments - Overview • Federal Requirements - 42 CFR § 443.72 • A state may receive, without reduction in FFP, healthcare-related assessment amounts if all of the following conditions are met: • The assessment is broad based • The assessment is uniformly imposed throughout a jurisdiction • The assessment program does not violate the hold harmless provisions • If these conditions are not met, the state may receive a waiver from CMS – AHCCCS anticipates the need to obtain waivers

5. Federal Requirements • Broad-Based and Uniformity Requirements • Broad-based - An assessment is considered to be broad-based if the assessment is imposed on at least all health care items or services in the class of providers of such items or services, and is imposed uniformly • Uniformly Imposed – Assessment must be imposed uniformly across all providers. A provider assessment is considered to be imposed uniformly even if it excludes Medicaid and/or Medicare amounts (although the exclusion of Medicaid revenues must be applied uniformly to all providers being taxed.

6. Federal Requirements • Uniformity Requirements • A provider assessment is considered to be imposed uniformly if it meets any one of the following criteria: • Licensing fee (or similar): If the assessment is the same amount for every provider furnishing those items or services within the class. • Licensing fee (or similar) on the basis of the number of beds: If the amount of the assessment is the same for each bed of each provider of those items or services in the class. • Assessment imposed on provider revenue or receipts: If the assessment is imposed at a uniform rate for all services in the class on all the gross revenues/receipts, or on net operating revenues relating to the provision of all services in the state, unit, or jurisdiction. • Assessment imposed on items or services on a basis other than those specified: If the state establishes that the amount of the assessment is the same for each provider.

7. Federal Requirements • Uniformity Requirements • Aprovider assessment is not considered to be imposed uniformly if it meets either one of the following two criteria: • The assessment provides for credits, exclusions, or deductions, which have as its purpose, or results in, the return to providers of all, or a portion, of the assessment paid, and it results, directly or indirectly, in an assessment program in which (1) The net impact of the assessment and payments is not generally redistributive; and (2) The amount of the assessment is directly correlated to payments under the Medicaid program. • The assessment holds taxpayers harmless for the cost of the tax (based on the hold-harmless provisions)

8. Federal Requirements • Waivers • Astate may request a waiver from CMS for the broad based and uniformity requirements for healthcare-related assessments. For CMS to approve a waiver, the state must demonstrate that its assessment program meets all of the following requirements: • The net impact of the assessment and any payments made to the providers by the state under the Medicaid program is generally redistributive • The amount of the assessment is not directly correlated to Medicaid payments • The assessment program does not fall within the hold harmless provisions

9. Federal Requirements • Waivers (Continued) • Broad-based Waiver (P1/P2 Test) - If a state requires a waiver of only the broad-based assessment requirement, it must demonstrate compliance with a redistributive test that measures, in aggregate, the proportion of the assessment burden to Medicaid providers. • Uniformity Waiver (B1/B2 Test) - If a state requires a waiver of the uniform tax requirement, whether or not the assessment is broad-based, it must demonstrate compliance with a different redistributive test that measures, for each provider, the relationship between the assessment burden and each provider’s “Medicaid Statistic”. • Hold Harmless – To qualify, CMS prohibits states from violating hold harmless provisions • See handouts for technical requirements for each of the above

10. Questions and Discussion