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HB232 INTRODUCED
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HB232
TBRUW19-1
By Representatives Lee, Reynolds
RFD: Ways and Means General Fund
First Read: 14-Jan-26
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TBRUW19-1 01/14/2026 TEW (F)TEW 2026-196
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First Read: 14-Jan-26
SYNOPSIS:
Currently, privately operated hospitals in this
state provide funding for the Medicaid Agency through a
provider privilege tax. This tax will end on September
30, 2028.
This bill would remove the sunset clause and
make the hospital provider privilege tax permanent.
A BILL
TO BE ENTITLED
AN ACT
Relating to the hospital provider privilege tax; to
amend Sections 40-26B-71, 40-26B-73, 40-26B-77.1, 40-26B-79,
40-26B-80, 40-26B-81, 40-26B-82, 40-26B-84, and 40-26B-88,
Code of Alabama 1975, as last amended by Act 2025-371, 2025
Regular Session; to make the hospital provider privilege tax
permanent.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 40-26B-71, 40-26B-73, 40-26B-77.1,
40-26B-79, 40-26B-80, 40-26B-81, 40-26B-82, 40-26B-84, and
40-26B-88, Code of Alabama 1975, as last amended by Act
2025-371, 2025 Regular Session, are amended as follows:
"§40-26B-71
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"§40-26B-71
(a) For state fiscal years 2026, 2027, and 2028, an
assessment is imposed on each In order to extend the assessment
that is imposed on each privately operated hospital in the
amount of 6.00 percent of net patient revenue beginning with
in fiscal year 2023, which shall be reviewed and hospital cost
reports updated annually, subject to limitations in this
article on the use of funds in the Hospital Assessment
Account. The assessment is a cost of doing business as a
privately operated hospital in the State of Alabama. Annually,
the Medicaid Agency shall make a determination of whether
changes in federal law or regulation have adversely affected
hospital Medicaid reimbursement during the most recently
completed fiscal year, or a reduction in payment rates has
occurred. If the agency determines that adverse impact to
hospital Medicaid reimbursement has occurred, or will occur,
the agency shall report its findings to the Chair of the House
Ways and Means General Fund Committee who shall propose an
amendment to this article during any legislative session prior
to the start of the upcoming fiscal year from the year the
report was made, to address the adverse impact. The assessment
imposed on each private hospital under this section shall be
reduced pro rata, if the total disproportionate share
allotment for all hospitals is reduced before or during the
2028current fiscal year, as a result of any action by the
Medicaid Agency or the Centers for Medicare and Medicaid
Services, and only to the extent that the Hospital Assessment
Account is more than necessary to fund some or all hospital
payments under this article.
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payments under this article.
(b)(1) ForBeginning with state fiscal years 2026, 2027,
and 2028 year 2026 , net patient revenue shall be determined
using the data from each private hospital's fiscal year ending
2023, 2024, or 2025 Medicare Cost Report contained in the
Centers for Medicare and Medicaid Services' Healthcare Cost
Report Information System, beginning with the fiscal year
ending 2023, which shall be reviewed and the hospital cost
reports updated annually subject to limitations in this
article on the use of funds in the Hospital Assessment
Account. The Medicare Cost Report for 2023 , 2024, and 2025 for
each private hospital, which shall be reviewed and updated
annually, shall be used for fiscal yearsyear 2026, 2027, and
2028, respectively . If the Medicare Cost Report is not
available in the Centers for Medicare and Medicaid Services'
Healthcare Cost Report Information System, the hospital shall
submit a copy to the department to determine the hospital's
net patient revenue for the most recent fiscal year.
(2) If a privately operated hospital commenced
operations after the due date for a 2023 Medicare Cost Report
as provided in subsection (b)(1) , the hospital shall submit
its most recent Medicare Cost Report to the department in
order to allow the department to determine the hospital's net
patient revenue.
(c) This article does not authorize a unit of county or
local government to license for revenue or impose a tax or
assessment upon hospitals or a tax or assessment measured by
the income or earnings of a hospital."
"§40-26B-73
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"§40-26B-73
(a)(1) There is created within the Health Care Trust
Fund referenced in Article 3 of Chapter 6 of Title 22 a
designated account known as the Hospital Assessment Account.
(2) The hospital assessments imposed under this article
shall be deposited into the Hospital Assessment Account.
(b) Monies in the Hospital Assessment Account shall
consist of:
(1) All monies collected or received by the department
from privately operated hospital assessments imposed under
this article;
(2) Any interest or penalties levied in conjunction
with the administration of this article; and
(3) Any appropriations, transfers, donations, gifts, or
monies from other sources, as applicable.
(c) The Hospital Assessment Account shall be separate
and distinct from the State General Fund and shall be
supplementary to the Health Care Trust Fund.
(d) Monies in the Hospital Assessment Account shall not
be used to replace other general revenues appropriated and
funded by the Legislature or other revenues used to support
Medicaid.
(e) The Hospital Assessment Account shall be exempt
from budgetary cuts, reductions, or eliminations caused by a
deficiency of State General Fund revenues to the extent
permissible under Section 213 of the Constitution of Alabama
of 2022.
(f)(1) Except as necessary to reimburse any funds
borrowed to supplement funds in the Hospital Assessment
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borrowed to supplement funds in the Hospital Assessment
Account, the monies in the Hospital Assessment Account shall
be used only as follows:
a. To make public, private, and state inpatient and
outpatient hospital payments.
b. To reimburse monies collected by the department from
hospitals through error or mistake or under this article.
(2)a. The Hospital Assessment Account shall retain
account balances remaining each fiscal year.
b. On September 30, 2014, and each year thereafter, any
positive balance remaining in the Hospital Assessment Account
which was not used by the Medicaid Agency to obtain federal
matching funds and paid out for hospital payments, shall be
factored into the calculation of any new assessment rate by
reducing the amount of hospital assessment funds that must be
generated during the next fiscal year. The Medicaid Agency may
carry over a balance of unspent assessment funds not
considered in the previous sentence and not to exceed
one-third of the total current year's assessment , through
fiscal year 2028 to account for future variations in hospital
expenses and federal match rates in the upcoming fiscal year.
If there is no new assessment beginning October 1, 2028 on or
after October 1, 2027 , the funds remaining shall be refunded
to the hospital that paid the assessment or made an
intergovernmental transfer in proportion to the amount
remaining.
(3) A privately operated hospital shall not be
guaranteed that its inpatient and outpatient hospital payments
will equal or exceed the amount of its hospital assessment."
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will equal or exceed the amount of its hospital assessment."
"§40-26B-77.1
(a) Beginning on October 1, 2016 , and ending on
September 30, 2028 , publicly owned and state-owned hospitals
shall begin making intergovernmental transfers to the Alabama
Medicaid Agency. Total IGTs for the total intergovernmental
transfers shall equal the amount of state funds necessary for
the agency to obtain only those federal matching funds
necessary to pay publicly owned and state-owned hospitals for
hospital payments.
(b) These intergovernmental transfers shall be made in
compliance with 42 U.S.C. § 1396b(w).
(c) If a publicly or state-owned hospital commences
operations after October 1, 2013, the hospital shall commence
making intergovernmental transfers to the Alabama Medicaid
Agency in the first full month of operation of the hospital
after October 1, 2013."
"§40-26B-79
The agency shall pay hospitals , as a base amount for
fiscal years 2026, 2027, and 2028, the greater of a hospital's
current per diem as published for fiscal year 2022 or 68
percent of total inpatient payments made by the agency during
state fiscal year 2019, divided by the total patient days paid
in state fiscal year 2019, multiplied by patient days paid
during the current fiscal year fiscal years 2026, 2027, and
2028. A hospital may request to have their per diem reviewed
and revised at the sole discretion of the Medicaid Agency.
This payment to be paid using the agency's published check
write table is in addition to any hospital access payments the
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write table is in addition to any hospital access payments the
agency may elect to pay hospitals as inpatient payments other
than per diems and access payments, if the agency does not
make payments pursuant to Article 9 of Chapter 6 of Title 22
in fiscal year 2019, or fiscal years 2026 , 2027, and 2028 and
thereafter , only if the Hospital Services and Reimbursement
Panel approves the change in hospital payments."
"§40-26B-80
If the Alabama Medicaid Agency implements OPPS, the
total amount budgeted (total base rate) for OPPS shall not be
less than the total outpatient UPL.
The agency shall pay hospitals as a base amount for
fiscal years 2026, 2027, and 2028 for outpatient services,
based upon an outpatient fee schedule in existence on
September 30, 2018. Medicaid may update the outpatient fee
schedule with approval of the Hospital Services and
Reimbursement Panel. Hospital outpatient base payments shall
be in addition to any hospital access payments or other
payments described in this article."
"§40-26B-81
(a) The agency shall consider the published inpatient
and outpatient rates as defined in Sections 40-26B-79 and
40-26B-80 as the minimum payment allowed.
(b) The aggregate hospital access payment amount is an
amount equal to the upper payment limit, less total hospital
base payments determined under this article. All publicly,
state-owned, and privately operated hospitals shall be
eligible for inpatient and outpatient hospital access payments
for fiscal years 2026, 2027, and 2028, as set forth in this
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for fiscal years 2026, 2027, and 2028, as set forth in this
article.
(1) In addition to any other funds paid to hospitals
for inpatient hospital services to Medicaid patients, each
eligible hospital shall receive inpatient hospital access
payments each state fiscal year. Publicly and state-owned
hospitals shall receive total payments, including hospital
base payments, that, in the aggregate, equal the upper payment
limit for publicly and state-owned hospitals, until the
Hospital Assessment Account is exhausted. Privately operated
hospitals shall receive total payments, including hospital
base payments that, in the aggregate, equal the upper payment
limit for privately operated hospitals, until the Hospital
Assessment Account is exhausted. Any intergovernmental
transfers and hospital provider taxes shall be used only as
monies paid to hospitals.
(2) Inpatient hospital access payments shall be made on
a quarterly basis.
(3) In addition to any other funds paid to hospitals
for outpatient hospital services to Medicaid patients, each
eligible hospital shall receive outpatient hospital access
payments each state fiscal year. Publicly and state-owned
hospitals shall receive payments, including hospital base
payments, that, in the aggregate, equal the upper payment
limit for publicly and state-owned hospitals, until the
Hospital Assessment Account is exhausted. Privately operated
hospitals shall receive payments, including hospital base
payments, that, in the aggregate, equal the upper payment
limit for privately operated hospitals, until the Hospital
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limit for privately operated hospitals, until the Hospital
Assessment Account is exhausted.
(4) Outpatient hospital access payments shall be made
on a quarterly basis.
(c) A hospital access payment shall not be used to
offset any other payment by the Medicaid Agency for hospital
inpatient or outpatient services to Medicaid beneficiaries,
including, without limitation, any fee-for-service, per diem,
private or public hospital inpatient adjustment, or hospital
cost settlement payment.
(d) The specific hospital payments for publicly,
state-owned, and privately operated hospitals shall be
described in the state plan amendment to be submitted to and
approved by the Centers for Medicare and Medicaid Services."
"§40-26B-82
(a) The assessment imposed under this article shall not
take effect or shall cease to be imposed and any monies
remaining in the Hospital Assessment Account in the Alabama
Medicaid Program Trust Fund shall be refunded to hospitals in
proportion to the amounts paid by them if any of the following
occur:
(1) Expenditures for hospital inpatient and outpatient
services paid for by the Alabama Medicaid Program for fiscal
years 2026, 2027, and 2028 for the current fiscal year are
less than the amount paid during fiscal year 2017 or
reimbursement rates under this article for fiscal years 2026,
2027, and 2028 are less than the rates approved by CMS in
Sections 40-26B-79 and 40-26B-80.
(2) The Alabama Medicaid Agency makes changes in rules
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(2) The Alabama Medicaid Agency makes changes in rules
that reduce hospital inpatient payment rates, outpatient
payment rates, or adjustment payments, including any cost
settlement protocol, which were in effect on September 30,
2025during the current fiscal year .
(3) The inpatient or outpatient hospital access
payments required under this article are changed or the
assessments imposed or certified public expenditures or
intergovernmental transfers recognized under this article are
not eligible for federal matching funds under Title XIX of the
Social Security Act, 42 U.S.C. § 1396 et seq., or 42 U.S.C. §
1397aa et seq.
(4) The Alabama Medicaid Agency contracts with an
alternate care provider in a Medicaid region under any terms
other than the following:
a. The agency may contract with an alternate care
provider only if, in the judgment of the agency, care of
Medicaid enrollees would be better, more efficient, and less
costly than under the then existing care delivery system. The
agency may contract with more than one alternate care provider
in a Medicaid region.
b. If the agency were to contract with an alternate
care provider under the terms of this subdivision, that
provider would have to pay reimbursements for hospital
inpatient or outpatient care at rates at least equal to the
most recent published rates pursuant to Sections 40-26B-79 and
40-26B-80.
c. If more than a year had elapsed since the agency
directly paid reimbursements to hospitals, the minimum
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directly paid reimbursements to hospitals, the minimum
reimbursement rates paid by the alternate care provider would
have to be changed to reflect any percentage increase in the
national medical consumer price index minus 100 basis points.
(b)(1) The assessment imposed under this article shall
not take effect or shall cease to be imposed if the assessment
is determined to be an impermissible tax under Title XIX of
the Social Security Act, 42 U.S.C. § 1396 et seq.
(2) Monies in the Hospital Assessment Account in the
Alabama Medicaid Program Trust Fund derived from assessments
imposed before the determination described in subdivision (1)
shall be disbursed under this article to the extent federal
matching is not reduced due to the impermissibility of the
assessments, and any remaining monies shall be refunded to
hospitals in proportion to the amounts paid by them."
"§40-26B-84
This article shall be of no effect if federal financial
participation under Title XIX of the Social Security Act is
not available to the Medicaid Agency at the approved federal
medical assistance percentage, established under Section 1905
of the Social Security Act, now appearing as U.S.C. § 1369d ,
for the state fiscal years 2026, 2027, and 2028 ."
Section 2. Section 40-26B-88, Code of Alabama 1975,
relating to the termination of the Hospital Provider Privilege
Tax, is repealed.
Section 3. This act shall become effective on October
1, 2026.
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