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Department requests $190M related to hospital assessment after UPL methodology changes
Summary
Analysts and the Department of Health and Welfare told JFAC that changes to upper payment limit methodology tied to SB 1350 (2022) increased the hospital assessment the state must process. The department requested a $190 million supplemental (mix of dedicated hospital-assessment funds and federal dollars) and asked to make the change ongoing.
Department and legislative analysts told the Joint Finance-Appropriations Committee on Feb. 26 that changes to the method for calculating the upper payment limit (UPL) for hospitals and skilled nursing facilities have raised the assessment amount the state needs to record.
Analyst Alex Williamson said the supplemental request tied to the hospital assessment fund totals $190 million; of that, roughly $77 million is from dedicated assessment receipts and about $113 million would be federal funds drawn down as a result of the assessment change.
Why this matters: the hospital assessment is a dedicated funding mechanism hospitals and the state use to draw federal Medicaid funds; changes in the assessment calculation can materially alter how much federal money the state is eligible to claim and how much assessment revenue must be recorded on state books.
Williamson linked the accounting effects to Senate Bill 1350 of 2022, which changed methodology for calculating the upper payment limit for skilled nursing and hospitals. She said a similar supplemental was passed mid‑year for fiscal 2024 after hospitals realized the assessment that would 'hit the state's books' was larger than forecasted.
Representative Tanner told the committee he was concerned the assessment functions "like a blank check to the hospitals" and asked whether the assessment could be redirected in statute to more explicitly offset expansion costs or be tied to other state priorities. Williamson said any change to how assessments are used or directed would require policy changes and legislation.
Director Alex Adams and analysts described this request as both a supplemental for fiscal 2025 and an ongoing 2026 enhancement to allow the division to process the higher assessment receipts and access federal funds; the committee did not vote on the request during the hearing.
The department said the supplemental request responds to accounting and matching changes after the UPL methodology shift and that any statutory redirection of assessment receipts would require legislative action.
