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March 18, 2021

Hospital Franchise Fee Assessment Deadlines Pushed Back

The Ohio Department of Medicaid has announced new deadlines for hospitals to submit their state fiscal year 2021 franchise fee assessments. The four originally scheduled payment deadlines have been replaced with two new dates: April 13 and May 31.

Under legislation passed in late 2020, the franchise fee assessments paid by hospitals in state fiscal year 2021 increased. However, payments being made back to hospitals are also increasing. The hospital assessments will grow by $193 million and the overall net gain to hospitals under the program is increasing by $505 million. The additional funds, referred to as cost coverage add-ons, will be paid out as a one-time directed payment to hospitals no later than June 30.

The hospital franchise fee is used by the state of Ohio to draw down federal funds in order to help cover the cost of administering and providing services under the Medicaid program. Nearly every state uses some type of provider fee or tax to help fund its share of the Medicaid program, which is paid for jointly by state and federal governments. 

In Ohio, the franchise fee is a tax on hospitals’ non-Medicare expenses, with all hospitals paying the same rate. With the recent changes, the final assessment rate for 2021 was 3.93%. For each dollar in tax paid by the hospitals, $3 are drawn down in federal funding. Of this pool of combined funding, a bit less than half is distributed to hospitals to help pay for patient care while the remaining funds are used by the state to cover costs associated with administering the program as well as for additional provider payments.

For more on the hospital franchise fee, contact us.