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HLS 26RS-2602 ENGROSSED
2026 Regular Session
HOUSE BILL NO. 1185
BY REPRESENTATIVE MILLER
MEDICAID: Provides for other rural hospital reimbursement payments and directed
payments
1 AN ACT
2 To enact Part V-B of Subchapter B of Chapter 5-D of Title 40 of the Louisiana Revised
3 Statutes of 1950, to be comprised of R.S. 40:1190.1 through 1190.5, relative to
4 payment methodologies for hospitals; to provide for legislative findings; to provide
5 for definitions; to provide for reimbursements and directed payments for other rural
6 hospitals; to provide for the promulgation of rules; to provide for duties of the
7 Louisiana Department of Health; to provide for applicability; to provide for an
8 effective date; and to provide for related matters.
9 Be it enacted by the Legislature of Louisiana:
10 Section 1. Part V-B of Subchapter B of Chapter 5-D of Title 40 of the Louisiana
11 Revised Statutes of 1950, comprised of R.S. 40:1190.1 through 1190.5, is hereby enacted
12 to read as follows:
13 PART V-B. PRESERVATION ACT FOR OTHER RURAL HOSPITALS
14 §1190.1. Short title
15 This Part may be cited as the "Preservation Act For Other Rural Hospitals".
16 §1190.2. Legislative findings; purpose
17 The legislature finds that:
18 (1) Small rural hospitals provide most of the healthcare services required by
19 a substantial number of low-income rural residents living in the state and therefore
20 constitute an invaluable part of the healthcare delivery system of the state.
21 (2) Residents living in rural areas of the state, which consist of sixty-four
22 percent of the state's parishes, are in poorer health than residents living in the urban
23 areas of the state and lack adequate public transportation.
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1 (3) Other small rural hospitals are in poor financial condition as a result of
2 payment reductions in the Medicare and Medicaid programs and as a result of the
3 advent and penetration of managed care in the state.
4 (4) Other rural hospitals have a difficult time attracting physicians to practice
5 in their service areas, thereby resulting in a continued shortage of primary health care
6 in the state's rural areas.
7 (5) Reductions in the Medicare and Medicaid programs, changes in
8 healthcare reimbursement methodologies, and the spread of managed care could
9 cause the closure of many of the state's other rural hospitals, thereby jeopardizing the
10 very existence of a vital link in the healthcare delivery systems for residents residing
11 in rural areas of the state.
12 (6) Other rural hospitals often constitute the largest single employer of
13 residents in areas served by them and thus constitute a vital component of many rural
14 parish economies.
15 (7) The enactment of the Rural Hospital Preservation Act has preserved
16 Louisiana's rural hospitals, a key component of the state's healthcare safety net which
17 is essential to ensuring access to health care for Louisiana's rural residents, and other
18 rural hospitals require the same efforts to survive.
19 (8) The Preservation Act for Other Rural Hospitals requires the Louisiana
20 Department of Health to maximize Medicaid reimbursement to other rural hospitals
21 comparable to rural hospitals.
22 (9) Congress has established a federal cap on each state's allotment of
23 Medicaid disproportionate share reimbursement and Louisiana's disproportionate
24 share expenditures have reached the federal cap.
25 (10) It is in the state's interest to reduce unreimbursed costs at other rural
26 hospitals by increasing Medicaid reimbursement for inpatient and outpatient services
27 at other rural hospitals, including costs associated with services provided at rural
28 health clinics that are licensed as part of other rural hospitals.
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1 (11) Increasing inpatient and outpatient reimbursement under Medicaid at
2 other rural hospitals will increase the disproportionate share hospital funding
3 available to the state for non-rural, hospital-related disproportionate share hospital
4 payments, thereby permitting the state to meet additional hospital-related
5 uncompensated care needs.
6 §1190.3. Definitions
7 As used in this Part, the following terms have the meaning ascribed in this
8 Section unless the context clearly indicates otherwise:
9 (1) "Department" means the Louisiana Department of Health or its successor
10 in the role of designated state agency under Title XIX of the Social Security Act or
11 any successor Act including but not limited to block grants or other funding for
12 medical care of the poor.
13 (2) "Emergency medical condition" means acute symptoms of sufficient
14 severity such that the absence of immediate medical attention could reasonably be
15 expected to result in any one or more of the following:
16 (a) Placing the health of the individual in serious jeopardy, including the
17 health of the unborn child in the case of a pregnant woman.
18 (b) Serious impairment to any bodily function.
19 (c) Serious dysfunction of any bodily part.
20 (3) "Healthcare provider" means a person, corporation, facility, or institution
21 licensed by the state to provide health care or professional services as a physician,
22 nurse, or allied health professional.
23 (4) "Other rural hospital" means a hospital licensed by the department which
24 has no more than sixty hospital beds, excluding distinct part psychiatric unit beds,
25 distinct part rehabilitation unit beds, and nursery bassinets, as of October 1, 2024,
26 and meets all of the following criteria:
27 (a) Is not located within one of Louisiana's metropolitan statistical areas as
28 delineated in Office of Management and Budget Bulletin No. 23-01.
29 (b) Has an operational emergency room.
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1 (c) Is located in a municipality with a population of less than twenty-three
2 thousand as measured by the latest federal decennial census.
3 (d) Is not a rural hospital as defined in R.S. 40:1189.3, a long-term care
4 hospital, a rehabilitation hospital, or a free-standing psychiatric hospital.
5 (5) "Prospective rate approximating cost" means the median cost of an other
6 rural hospital providing inpatient acute or inpatient psychiatric services plus ten
7 percent, which cost has been inflated by the Medicare market basket inflation factor
8 to the midpoint of the state's fiscal year in which services may be furnished. The
9 median cost and rates shall be re-based by the department at least every other year
10 using the most current other rural hospital cost reports on file with the department.
11 (6) "Reasonable cost" means the cost of hospital outpatient services,
12 including without limitation provider-based rural health clinics, utilizing Medicare
13 cost reimbursement principles applicable to the respective other rural hospital,
14 including hospital-based rural health clinics licensed at hospital departments. In the
15 event a more limited definition of reasonable cost is required to obtain federal
16 approval for the related state plan amendment for those other rural hospitals that are
17 reimbursed under Medicare's Prospective Payment System, hereinafter referred to
18 in this Part as "PPS", the department shall utilize the most liberal definition of
19 "reasonable cost" for such rural PPS hospitals that is acceptable to the United States
20 Department of Health and Human Services, Centers for Medicare and Medicaid
21 Services, hereinafter referred to in this Part as "CMS".
22 (7) "Rural hospital" means a hospital defined in R.S. 40:1189.3.
23 (8) "State plan for medical assistance" means the plan promulgated by the
24 department in accordance with its role as designated state agency under Title XIX
25 of the Social Security Act, or its successor plan, including but not limited to any plan
26 adopted pursuant to any federal law creating block grants or other funding for
27 medical care of the poor.
28 §1190.4. Medical assistance programs; other rural hospital reimbursement
29 A. The department shall adopt rules and regulations in accordance with the
30 Administrative Procedure Act that provide the following:
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1 (1) Allow an other rural hospital to certify, as a contributing public agency,
2 public funds as representing expenditures eligible for federal financial participation
3 in the Medicaid program to the extent authorized by federal law. The expenditure of
4 such funds shall be in accordance with rules promulgated by the department.
5 (2)(a) Maximize funding for services rendered by other rural hospitals to the
6 extent allowed by federal law, comparable to funding for services rendered by rural
7 hospitals, and in amounts that may be appropriated by the legislature relative to the
8 use of Medicaid reimbursement. To the extent that intergovernmental transfers and
9 the certification of eligible expenditures are available for recognition of state match
10 for such Medicaid reimbursement, the department shall maximize the use of such
11 amounts for the benefit of other rural hospitals to increase access to health care for
12 Medicaid and LaCHIP beneficiaries as well as indigent individuals.
13 (b) Subject to the limitations provided for in R.S. 40:1190.5, by September
14 1, 2026, the department shall file a state plan amendment with CMS amending the
15 Medicaid state plan provisions governing Medicaid hospital reimbursement to
16 provide that an other rural hospital, as defined in R.S. 40:1190.3, shall be reimbursed
17 at a rate, comparable to rural hospitals, which equals or approximates one hundred
18 ten percent, or, if a reduction is required by CMS, the maximum amount acceptable
19 to CMS, but in no event less than one hundred percent of the appropriate reasonable
20 cost of providing hospital inpatient and outpatient services, including but not limited
21 to services provided in rural health clinics licensed as part of an other rural hospital.
22 The new payment methodology for other rural hospitals shall utilize prospective
23 rates approximating costs at the time of service for inpatient acute and psychiatric
24 services. To ensure that outpatient services at other rural hospitals are reimbursed
25 in the aggregate at one hundred ten percent of the reasonable costs or such lesser
26 amounts as approved by CMS, but in no event less than one hundred percent of their
27 reasonable costs, the department shall pay an interim rate for cost-based outpatient
28 services at one hundred ten percent of reasonable cost during the year and for fee-
29 based services paid on a claim-by-claim basis, and the department shall make
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1 quarterly estimates of a supplemental payment required to bring the hospital's
2 reimbursement for such services up to one hundred percent of reasonable costs and
3 immediately remit such payments to the hospital and at final settlement pay such
4 amounts as necessary to ensure that all outpatient services in the aggregate, cost
5 based and fee schedule, are paid at one hundred ten percent of reasonable costs.
6 (c) On an expedited basis, the department shall take all steps necessary and
7 available to obtain CMS approval for the state plan amendment and shall,
8 immediately upon notification of such approval, promulgate an emergency rule to
9 implement the state plan amendment that complies with the limitations provided for
10 in R.S. 40:1190.5.
11 (d) Once the outpatient cost-based reimbursement payment methodology is
12 implemented, the department shall set and monitor interim payment rates to
13 minimize the amount of annual cost settlements.
14 (e) For cost reporting periods ending after July 1, 2026, the department shall
15 pay, at least comparable to such payment to rural hospitals, seventy-five percent of
16 interim other rural hospital outpatient cost report settlement amounts due and one
17 hundred percent of final other rural hospital outpatient cost report settlement
18 amounts due within fourteen days of receipt by the department of such reports from
19 the Medicaid audit contractor.
20 (f) The new payment methodology for other rural hospitals shall be effective
21 for services provided on or after July 1, 2026, or as soon thereafter as may be
22 permitted by federal law.
23 (3)(a) Effective for services provided on or after July 1, 2026, or as soon
24 thereafter as may be permitted by federal law, the department shall develop and
25 implement, by emergency rule, a payment methodology comparable to the payment
26 methodology for other rural hospitals, including but not limited to directed payments,
27 which optimizes Medicaid inpatient and outpatient payments to other rural hospitals.
28 Payments shall be developed utilizing available Medicare upper payment limits,
29 average commercial rates, or other standard for inpatient and outpatient services in
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1 accordance with state and federal law. Calculated payments shall be distributed to
2 qualifying other rural hospitals no less than quarterly, or as authorized by federal
3 law.
4 (b) After federal funds are optimized, the remaining appropriated funds for
5 other rural hospitals may be utilized to develop a state-only funded program to
6 provide direct funds to qualifying other rural hospitals to support access to services
7 that would not be available otherwise. In the event the amount appropriated for such
8 state-only funded program is insufficient in any state fiscal year to meet the total
9 payments required by all other rural hospitals to recover payment reductions, the
10 payments to qualifying other rural hospitals pursuant to this state-only funded
11 program may be reduced proportionately.
12 (c) The department shall review Medicaid and uninsured cost information,
13 payment information, patient charges, and hospital financial statements to the extent
14 required by state or federal law to determine the optimal combination of payments.
15 (d) Other rural hospitals that do not provide the minimum set of
16 documentation required in Subparagraph (3)(c) of this Paragraph to determine the
17 optimal combination of payments shall not be eligible for additional payments.
18 (e) The department is hereby authorized to publish and promulgate rules in
19 accordance with the Administrative Procedure Act to implement the provisions of
20 this Paragraph, subject to the limitations provided for in R.S. 40:1190.5.
21 (4)(a) Notwithstanding any provision of this Part to the contrary, other rural
22 hospitals shall not be eligible to receive any reimbursement increase, supplemental
23 payment, directed payment, or any other payment authorized in accordance with this
24 Part, unless such hospital is current on all assessment payments and is not delinquent
25 or in arrears as determined by the department.
26 (b) The department shall withhold, offset, or recoup any payments
27 authorized in accordance with this Part for any hospital that is not compliance with
28 assessment obligations until such obligations are satisfied.
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1 B. The rules promulgated pursuant to Subsection A of this Section shall be
2 promulgated no later than one hundred twenty days after August 15, 2026. No later
3 than one hundred twenty days after August 15, 2026, the department shall also
4 submit to the secretary of the United States Department of Health and Human
5 Services those amendments to the state plan for medical assistance necessary to
6 conform the state plan for medical assistance with the provisions of Subsection A of
7 this Section subject to the limitations provided for in R.S. 40:1190.5.
8 §1190.5. Separate funding
9 A. Notwithstanding any provision of law to the contrary, annual funding for
10 other rural hospitals shall be subject to a separate annual appropriation by the
11 legislature and shall be a sufficient amount so as to protect and hold rural hospitals
12 harmless from any direct or indirect negative financial effects from the
13 implementation of this Part. The provisions of the Part or the implementation of this
14 Part shall not directly or indirectly reduce, replace, negatively affect, supplant, or
15 otherwise adversely affect current reimbursement or payment methodology utilized
16 on or reimbursement paid to rural hospitals, including but not limited to prospective
17 inpatient or outpatient rates as provided for in R.S. 40:1189.4. Rural hospital
18 Medicaid supplemental payments of any type, including without limitation directed
19 payments and related reconciliation adjustments, full Medicaid pricing payments, or
20 upper payment limit payments shall not be directly or indirectly negatively affected
21 by the provisions of this Part.
22 B. The department shall ensure funding provided in accordance with this
23 Part to other rural hospitals shall be supplemental to and shall not be used to offset,
24 subset, offset, substitute for, or reduce any existing or future federal, state, or local
25 funding streams available to rural hospitals.
26 C. The department shall ensure that implementation of this Part does not
27 result in any reduction in Medicaid reimbursement received by small rural hospitals,
28 either individually or in the aggregate.
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1 Section 2. This Act applies to Other Rural Hospitals as defined in state plan
2 amendment TN 24-0022, which became effective September 17, 2024. With respect to
3 reconciliation of managed care of state directed payments made to these hospitals under the
4 preprint approved by CMS on November 7, 2024, applicable to state fiscal year July 1, 2024
5 through June 30, 2025, the department shall ensure that these hospitals realize the net
6 economic benefit they would have received had state plan amendment TN 24-0022 been
7 effective July 1, 2024.
8 Section 3. The Louisiana State Law Institute is hereby authorized and directed to re-
9 designate Part V of Subchapter B of Chapter 5-D of Title 40 of the Louisiana Revised
10 Statutes of 1950, comprised of R.S. 40:1189.1 through 1189.7, as Part V-A of Subchapter
11 B of Chapter 5-D of Title 40.
12 Section 4. This Act shall become effective upon signature by the governor or, if not
13 signed by the governor, upon expiration of the time for bills to become law without signature
14 by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
15 vetoed by the governor and subsequently approved by the legislature, this Act shall become
16 effective on the day following such approval.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 1185 Engrossed 2026 Regular Session Miller
Abstract: Provides for other rural hospital reimbursement payments and directed payments.
Proposed law enacts the "Preservation Act for Other Rural Hospitals".
Proposed law defines "other rural hospitals" as a hospital licensed by the La. Dept. of Health
(LDH) which has no more than 60 hospital beds, excluding distinct part psychiatric beds,
distinct part rehabilitation unit beds, and nursery bassinets as of Oct. 1, 2024. The definition
also requires "other rural hospitals" to meet all of the following criteria:
(1) Is not located within one of La.'s metropolitan statistical areas.
(2) Has an operational emergency room.
(3) Is located in a municipality with a population of less than 23,000 as measured by the
latest federal decennial census.
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(4) Is not a rural hospital as defined in statute, a long-term care hospital, a rehabilitation
hospital, or a free-standing psychiatric hospital.
Proposed law allows other rural hospitals to certify as a public agency representing
expenditures eligible for federal financial participation in the Medicaid program to the extent
authorized by federal law.
Proposed law directs LDH to maximize funding for services rendered by other rural
hospitals (as allowed by federal law) in amounts that may be appropriated by the legislature
relative to the use of Medicaid reimbursement. Directs LDH to maximize the use of
intergovernmental transfers (IGT) and certification of eligible expenditures that are available
for state match for Medicaid reimbursement in order to increase access to health care for
Medicaid and LaCHIP beneficiaries.
Proposed law directs LDH to file a state plan amendment with CMS amending the Medicaid
state plan provisions governing Medicaid hospital reimbursement. The plan shall reimburse
other rural hospitals at a rate comparable to a rural hospital, equal or approximate to 110%.
If a reduction is required by CMS, LDH may reduce reimbursement to no less than 100%
of the appropriate reasonable costs of providing hospital inpatient and outpatient services.
Requires the new payment methodology to utilize prospective rates approximating costs at
the time of service of inpatient acute and psychiatric services.
Proposed law requires LDH to pay an interim rate for cost-based outpatient services at 110%
of reasonable cost during the year. Requires fee-based services to be paid on a claim-by-
claim basis and requires LDH to make quarterly estimates of supplemental payments
required to bring the other rural hospitals' reimbursement to 100% of reasonable costs.
Requires final settlement to the other rural hospitals to ensure that all outpatient services in
the aggregate are paid at 110% of reasonable costs.
Proposed law requires that for cost reporting periods ending after July 1, 2026, LDH shall
pay 75% of interim other rural hospital outpatient cost report settlement amounts due and
100% of final other rural hospital outpatient cost report settlement amounts due within 14
days of receipt by LDH of such reports from the Medicaid audit contractor.
Proposed law provides for a new payment methodology for other rural hospitals to be
effective on or after July 1, 2026, or as soon as permitted by federal law. Directs LDH to
promulgate rules to implement the reimbursement structure. Requires the rules to be
promulgated no later than 120 days after Aug. 15, 2026. Further requires LDH to
promulgate emergency rules upon CMS approval of the state plan amendment. Provides that
an other rural hospital shall not receive any payment provided for in proposed law if the
other rural hospital is not current on all assessment payments.
Proposed law requires that after federal funds are optimized, LDH may develop a state-only
funded program to provide direct funds to qualifying other rural hospitals to support access
to services that would otherwise not be available.
Proposed law requires annual funding for other rural hospitals to be a separate annual
appropriation by the legislature. Other rural hospitals shall not be funded by current or
future reimbursement pool, program, or other funding for other rural hospitals.
Proposed law requires LDH to review Medicaid and uninsured cost information, payment
information, patient charges, and hospital financial statements to the extent required by state
or federal law to determine the optimal combination of payments. Other rural hospitals that
do not provide the minimum set of documentation to LDH to determine the optimal
combination of payments shall not be eligible for additional payments.
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Proposed law provides that payments to other rural hospitals shall not impact funding or
payments to rural hospitals, as defined by present law, or Medicaid reimbursement received
by small rural hospitals.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Adds R.S. 40:1190.1 through 1190.5)
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Health and Welfare to
the original bill:
1. Provide for restrictions on funding for other rural hospitals for failure to fulfill
certain financial requirements.
2. Provide that funding for other rural hospitals shall not impact rural hospitals.
3. Make technical changes.
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