HF4143

Purpose

To temporarily suspend the hospital surcharge that funds the Medical Assistance account.

Main provisions

• The hospital surcharge is defined as a percentage of net patient revenues (excluding net Medicare revenues) paid by Minnesota hospitals to the Medical Assistance account, and is reported to the Health Care Cost Information System (HCIS) according to a schedule.
• Historical levels:
  • Effective October 1, 1992: surcharge set at 1.4%.
  • Effective July 1, 1994: surcharge increased to 1.56%.
• Temporarily suspending the surcharge:
  • Beginning July 1, 2026, the surcharge must not be imposed.
  • The suspension period ends July 1, 2027.
• Exemptions:
  • Hospitals that are facilities of the federal Indian Health Service (IHS) and regional treatment centers are exempt from paying the surcharge.
• Treatment for hospital costs:
  • The hospital surcharge is not considered an allowable cost for rate setting under the state rate-setting provisions (sections 256.9685 to 256.9695), even though Medicare cost findings and other cost principles may apply to other calculations.

Significant changes to existing law

• The key change is a temporary halt on the hospital surcharge starting July 1, 2026, with an expiration on July 1, 2027.
• During the suspension, the surcharge is not an allowable cost in setting hospital rates, which can affect how hospital costs are counted in rate negotiations and reimbursements.
• The geographic scope remains the same (most Minnesota hospitals), with explicit exemptions for IHS facilities and regional treatment centers.

Practical implications

• Hospitals will not pay the 1.4% (soon 1.56%) surcharge during the suspension period.
• The Medical Assistance account will not receive surcharge funds during this period, potentially affecting funding for that program.
• Rate-setting calculations will exclude the surcharge as an allowable cost for the duration of the suspension.

Terminology most relevant to this bill

• hospital surcharge
• Medical Assistance account
• net patient revenues
• net Medicare revenues
• Health Care Cost Information System (HCIS)
• schedule in subdivision 4
• 1.4 percent
• 1.56 percent
• October 1, 1992
• July 1, 1994
• July 1, 2026
• July 1, 2027
• Indian Health Service (IHS)
• regional treatment centers
• Medicare cost finding
• allowable cost
• rate setting
• sections 256.9685 to 256.9695

Relevant Terms hospital surcharge; Medical Assistance account; net patient revenues; net Medicare revenues; Health Care Cost Information System; HCIS; schedule; 1.4 percent; 1.56 percent; October 1, 1992; July 1, 1994; July 1, 2026; July 1, 2027; Indian Health Service; IHS; regional treatment centers; Medicare cost finding; allowable cost; rate setting; 256.9685; 256.9695