Hospitals Feeling the Financial Crunch Impacted by Recent Legislation

July 3, 2008

New Hospital Assessment Program

On the final day of the 2008 spring legislative session, the Illinois Senate approved legislation that would extend the state’s hospital assessment tax until 2013. Senate Bill 2857 will allow hospitals to continue the practice of pooling money collected through a hospital tax to provide a match for federal Medicaid funds. This funding source is especially important to those “safety net” hospitals that serve a significant number of low-income or uninsured patients.

The current hospital assessment tax expires on June 30. The bill creating the new assessment still requires the Governor’s signature. In the meantime, the State of Illinois has submitted the Hospital Assessment Plan to the federal Centers for Medicare and Medicaid Services (CMS) for approval. Even in a best-case scenario, the necessary approvals may not be secured soon enough for hospitals experiencing financial difficulty. Individuals close to the process predict the plan may not be approved until spring 2009.

In a similar predicament is the $1.5 billion in funding appropriated in the state’s Fiscal Year 2009 budget to meet the federal match. Although the House and Senate approved a state budget on May 31, Governor Blagojevich thus far has refused to sign the budget bills, leaving the money appropriated for the hospital assessment in limbo. The Governor has declared the budget unbalanced and threatens to make drastic cuts in the areas of education and human services unless the legislature corrects the imbalance. He has called the House and Senate back to Springfield for a special session on July 9 and 10 to address the state’s revenue needs and possible budget cuts.

Bill Provides Discounts for Uninsured Patients

Although many hospitals already have similar programs in place, legislation was approved by the General Assembly, forcing hospitals to discount the amount that hospitals can charge uninsured patients. If signed by the Governor, Senate Bill 2380 will establish the Hospital Uninsured Patient Discount Act. The bill, which was negotiated between the Illinois Hospital Association and the Illinois Attorney General, applies to all Illinois hospitals, whether not-for-profit or for-profit.

The Hospital Uninsured Patient Discount Act will require hospitals to apply a discount to all medically necessary healthcare services exceeding $300.00 in any one inpatient admission or outpatient encounter for uninsured patients that meet certain income criteria. The legislation provides discounts to 135% of cost for eligible uninsured patients that are Illinois residents. Moreover, the legislation will cap a hospital’s annual charges to such uninsured patients at 25% of the patient’s family income beginning on the first date an uninsured patient receives health care services eligible for the uninsured discount at that hospital.

The income criteria to determine eligibility for the uninsured discount differ depending on the type of hospital that provides care to such uninsured patient. Patients receiving care at a rural hospital or Critical Access Hospital will be eligible for the discount if the uninsured patient has an annual family income of not more than 300% of the federal poverty income guidelines. For all other hospitals, the family income of uninsured patients may not exceed 600% of the federal poverty income guidelines in order to meet the eligibility criteria for the discount. Hospitals are permitted to adopt policies to exclude uninsured patients that have assets valuing in excess of 300% of the federal poverty level for rural hospitals or Critical Access Hospitals, or 600% for all other hospitals. Assets do not include the uninsured patients’ primary residence, personal property exempt from judgment under Section 12-1001 of the Code of Civil Procedure, or any amount held in a pension or retirement plan, unless in the form of distribution or payment.

Under the provisions of the bill, hospitals may require patients to apply for coverage under public programs such as Medicare, Medicaid and CHIP to determine their eligibility under those existing programs before granting discounts. Hospitals may require patients to provide documentation of family income, Illinois residency and certify existence of assets owned by the patient. If the patient unreasonably fails to comply with such request or apply under public programs, the hospital’s obligations toward an individual shall cease within 30 days of such request.

Hospitals must include on each hospital bill, invoice or other summary to each uninsured patient, a prominent statement that an uninsured patient who meets certain income requirements may qualify for an uninsured discount and must include information regarding how an uninsured patient may apply for consideration under the hospital’s financial assistance policy. Patients may apply for a discount within 60 days of the date of discharge or date of service.

The Illinois Attorney General is granted enforcement powers under the legislation, and hospitals found in violation of the act are subject to fines not to exceed $500 per violation.

Hospital Funding Included in Capital Bill

A $31 billion capital spending plan surfaced in the final days of the spring session that would include $110 million for hospital infrastructure. While the overall proposal was approved by the state Senate, it failed to receive necessary support in the Illinois House. Supporters have not given up their efforts to pass a capital spending program, and will likely make additional attempts to pass the authorizing legislation during the fall veto session or the special session on the state budget. The portion of the spending allocated for hospitals would likely be distributed in the form of grants through the state Department of Commerce and Economic Opportunity.

For more information regarding the status of certain legislation please contact one of the following authors in McGuireWoods Consulting.

Brittan Bolin
217) 527-1284
[email protected] 

Amy Anderson Day
(312) 849-8118
[email protected]

For more information regarding compliance concerns, please contact one of the following authors in the McGuireWoods Health Care Practice.