2025 -- S 0848

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LC002513

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2025

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A N   A C T

RELATING TO HEALTH AND SAFETY -- LICENSING OF HEALTHCARE FACILITIES

     Introduced By: Senators Tikoian, DiPalma, Lawson, Ciccone, Gallo, Burke, Appollonio,
McKenney, Vargas, and Thompson

     Date Introduced: March 19, 2025

     Referred To: Senate Health & Human Services

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 23-17-38.1 of the General Laws in Chapter 23-17 entitled "Licensing

of Healthcare Facilities" is hereby amended to read as follows:

     23-17-38.1. Hospitals — Licensing fee.

     (a) There is imposed a hospital licensing fee for state fiscal year 2023 against each hospital

in the state. The hospital licensing fee is equal to five and forty-two hundredths percent (5.42%) of

the net patient-services revenue of every hospital for the hospital’s first fiscal year ending on or

after January 1, 2021, except that the license fee for all hospitals located in Washington County,

Rhode Island shall be discounted by thirty-seven percent (37%). The discount for Washington

County hospitals is subject to approval by the Secretary of the U.S. Department of Health and

Human Services of a state plan amendment submitted by the executive office of health and human

services for the purpose of pursuing a waiver of the uniformity requirement for the hospital license

fee. This licensing fee shall be administered and collected by the tax administrator, division of

taxation within the department of revenue, and all the administration, collection, and other

provisions of chapter 51 of title 44 shall apply. Every hospital shall pay the licensing fee to the tax

administrator on or before June 30, 2023, and payments shall be made by electronic transfer of

monies to the general treasurer and deposited to the general fund. Every hospital shall, on or before

May 25, 2023, make a return to the tax administrator containing the correct computation of net

patient-services revenue for the hospital fiscal year ending September 30, 2021, and the licensing

fee due upon that amount. All returns shall be signed by the hospital’s authorized representative,

subject to the pains and penalties of perjury.

     (b)(a) There is also imposed a hospital licensing fee described in subsections (c) through

(f) for state fiscal years 2024 and 2025 against net patient-services revenue of every non-

government owned hospital as defined herein for the hospital’s first fiscal year ending on or after

January 1, 2022. The hospital licensing fee shall have three (3) tiers with differing fees based on

inpatient and outpatient net patient-services revenue. The executive office of health and human

services, in consultation with the tax administrator, shall identify the hospitals in each tier, subject

to the definitions in this section, by July 15, 2023, and shall notify each hospital of its tier by August

1, 2023.

     (b) There is also imposed a hospital licensing fee described in subsections (c) through (f)

of this section for state fiscal year 2026 against net patient-services revenue of every non-

government owned hospital as defined herein for the hospital's first fiscal year ending on or after

January 1, 2024. The hospital licensing fee shall have three (3) tiers with differing fees based on

inpatient and outpatient net patient-services revenue. The executive office of health and human

services, in consultation with the tax administrator, shall identify the hospitals in each tier, subject

to the definitions in this section, by July 15, 2025, and shall notify each hospital of its assigned tier

by August 1, 2025.

     (c) Tier 1 is composed of hospitals that do not meet the description of either Tier 2 or Tier

3.

     (1) The inpatient hospital licensing fee for Tier 1 is equal to thirteen and twelve hundredths

percent (13.12%) of the inpatient net patient-services revenue derived from inpatient net patient-

services revenue of every Tier 1 hospital.

     (2) The outpatient hospital licensing fee for Tier 1 is equal to thirteen and thirty hundredths

percent (13.30%) of the net patient-services revenue derived from outpatient net patient-services

revenue of every Tier 1 hospital.

     (d) Tier 2 is composed of high Medicaid/uninsured cost hospitals and independent

hospitals.

     (1) The inpatient hospital licensing fee for Tier 2 is equal to two and sixty-three hundredths

percent (2.63%) of the inpatient net patient-services revenue derived from inpatient net patient-

services revenue of every Tier 2 hospital.

     (2) The outpatient hospital licensing fee for Tier 2 is equal to two and sixty-six hundredths

percent (2.66%) of the outpatient net patient-services revenue derived from outpatient net patient-

services revenue of every Tier 2 hospital.

     (e) Tier 3 is composed of hospitals that are Medicare-designated low-volume hospitals and

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rehabilitative hospitals.

     (1) The inpatient hospital licensing fee for Tier 3 is equal to one and thirty-one hundredths

percent (1.31%) of the inpatient net patient-services revenue derived from inpatient net patient-

services revenue of every Tier 3 hospital.

     (2) The outpatient hospital licensing fee for Tier 3 is equal to one and thirty-three

hundredths percent (1.33%) of the outpatient net patient-services revenue derived from outpatient

net patient-services revenue of every Tier 3 hospital.

     (f) There is also imposed a hospital licensing fee for state fiscal year 2024 against state-

government owned and operated hospitals in the state as defined herein. The hospital licensing fee

is equal to five and twenty-five hundredths percent (5.25%) of the net patient-services revenue of

every hospital for the hospital’s first fiscal year ending on or after January 1, 2022. There is also

imposed a hospital licensing fee for state fiscal year 2025 against state-government owned and

operated hospitals in the state as defined herein equal to five and twenty-five hundredths percent

(5.25%) of the net patient-services revenue of every hospital for the hospital’s first fiscal year

ending on or after January 1, 2023.

     (g) The hospital licensing fee described in subsections (b) through (f) is subject to U.S.

Department of Health and Human Services approval of a request to waive the requirement that

healthcare-related taxes be imposed uniformly as contained in 42 C.F.R. § 433.68(d).

     (h) This hospital licensing fee shall be administered and collected by the tax administrator,

division of taxation within the department of revenue, and all the administration, collection, and

other provisions of chapter 51 of title 44 shall apply. Every hospital shall pay the licensing fee to

the tax administrator before June 30 of each fiscal year, and payments shall be made by electronic

transfer of monies to the tax administrator and deposited to the general fund. Every hospital shall,

on or before August 1, 2023 2025, make a return to the tax administrator containing the correct

computation of inpatient and outpatient net patient-services revenue for the hospital fiscal year

ending in 2022 2024, and the licensing fee due upon that amount. All returns shall be signed by the

hospital’s authorized representative, subject to the pains and penalties of perjury.

     (i) Any funds collected pursuant to this provision in excess of ninety million dollars

($90,000,000) shall be used to increase Medicaid reimbursement for hospitals under managed care

and fee-for-service for all of the following subject to approval by the federal Centers for Medicare

and Medicaid Services:

     (1) Fee-for-service upper payment limit payments for inpatient hospital services and

outpatient hospital services as authorized in § 40-8.3-10;

     (2) Disproportionate share hospital payments for hospitals that are eligible to participate

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and receive payments in the disproportionate share hospital program as authorized in § 40-8.3-3;

     (3) Medicaid rate increases for inpatient hospital services and outpatient hospital services

as directed in § 40-8-13.4; and

     (4) State directed managed care payments as authorized by § 42-12.4-10.

     (i)(j) For purposes of this section the following words and phrases have the following

meanings:

     (1) “Gross patient-services revenue” means the gross revenue related to patient care

services.

     (2) “High Medicaid/uninsured cost hospital” means a hospital for which the hospital’s total

uncompensated care, as calculated pursuant to § 40-8.3-2(4), divided by the hospital’s total net

patient-services revenues, is equal to six percent (6.0%) or greater.

     (3) “Hospital” means the actual facilities and buildings in existence in Rhode Island,

licensed pursuant to § 23-17-1 et seq. on June 30, 2010, and thereafter any premises included on

that license, regardless of changes in licensure status pursuant to chapter 17.14 of this title (hospital

conversions) and § 23-17-6(b) (change in effective control), that provides short-term acute inpatient

and/or outpatient care to persons who require definitive diagnosis and treatment for injury, illness,

disabilities, or pregnancy. Notwithstanding the preceding language, the negotiated Medicaid

managed care payment rates for a court-approved purchaser that acquires a hospital through

receivership, special mastership, or other similar state insolvency proceedings (which court-

approved purchaser is issued a hospital license after January 1, 2013) shall be based upon the newly

negotiated rates between the court-approved purchaser and the health plan, and such rates shall be

effective as of the date that the court-approved purchaser and the health plan execute the initial

agreement containing the newly negotiated rate. The rate-setting methodology for inpatient hospital

payments and outpatient hospital payments set forth in §§ 40-8-13.4(b) and 40-8-13.4(b)(2),

respectively, shall thereafter apply to negotiated increases for each annual twelve-month (12)

period as of July 1 following the completion of the first full year of the court-approved purchaser’s

initial Medicaid managed care contract.

     (4) “Independent hospitals” means a hospital not part of a multi-hospital system.

     (5) “Inpatient net patient-services revenue” means the charges related to inpatient care

services less (i) Charges attributable to charity care; (ii) Bad debt expenses; and (iii) Contractual

allowances.

     (6) “Medicare-designated low-volume hospital” means a hospital that qualifies under 42

C.F.R. 412.101(b)(2) for additional Medicare payments to qualifying hospitals for the higher

incremental costs associated with a low volume of discharges.

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     (7) “Net patient-services revenue” means the charges related to patient care services less

(i) Charges attributable to charity care; (ii) Bad debt expenses; and (iii) Contractual allowances.

     (8) “Non-government owned hospitals” means a hospital not owned and operated by the

state of Rhode Island.

     (9) “Outpatient net patient-services revenue” means the charges related to outpatient care

services less (i) Charges attributable to charity care; (ii) Bad debt expenses; and (iii) Contractual

allowances.

     (10) “Rehabilitative hospital” means Rehabilitation Hospital Center licensed by the Rhode

Island department of health.

     (11) “State-government owned and operated hospitals” means a hospital facility licensed

by the Rhode Island department of health, owned and operated by the state of Rhode Island.

     (j)(k) The tax administrator in consultation with the executive office of health and human

services shall make and promulgate any rules, regulations, and procedures not inconsistent with

state law and fiscal procedures that he or she deems necessary for the proper administration of this

section and to carry out the provisions, policy, and purposes of this section.

     (k)(l) The licensing fee imposed by subsection (a) shall apply to hospitals as defined herein

that are duly licensed on July 1, 2022, and shall be in addition to the inspection fee imposed by §

23-17-38 and to any licensing fees previously imposed in accordance with this section.

     (l)(m) The licensing fees imposed by subsections (b) through (f) shall apply to hospitals as

defined herein that are duly licensed on July 1, 2023 2024, and shall be in addition to the inspection

fee imposed by § 23-17-38 and to any licensing fees previously imposed in accordance with this

section.

     SECTION 2. Chapter 42-12.4 of the General Laws entitled "The Rhode Island Medicaid

Reform Act of 2008" is hereby amended by adding thereto the following section:

     42-12.4-10. Hospital state directed managed care payments.

     The executive office of health and human services is hereby authorized and directed to

maintain and enforce the practice, in effect since July 1, 2023, of amending its regulations for

reimbursement to Medicaid Managed Care Organizations (MMCO) and directing MMCOs to make

quarterly state-directed payments each year to hospitals for inpatient and outpatient services. Such

payments shall be made in accordance with the payment methodology contained in the approved

CMS preprint for hospital state-directed payments.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO HEALTH AND SAFETY -- LICENSING OF HEALTHCARE FACILITIES

***

     This act would impose a hospital licensing fee for state fiscal year 2026 against net patient-

services revenue of every non-government owned hospital for the hospital’s first fiscal year ending

on or after January 1, 2024. The hospital licensing fee would have three (3) tiers with differing fees

based on inpatient and outpatient net patient-services revenue. The executive office of health and

human services, in consultation with the tax administrator, would identify the hospitals in each tier,

by July 15, 2025, and would notify each hospital of its assigned tier by August 1, 2025.

     This act would take effect upon passage.

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