HB 173 - SB 185
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
January 26, 2025
Fiscal Analyst: Chris Higgins | Email: chris.higgins@capitol.tn.gov | Phone: 615-741-2564
HB 173 - SB 185
SUMMARY OF BILL: Establishes that the hospital payment rate corridor for payments
by managed care organizations to certain rural hospitals for routine, non-specialized inpatient
services provided to TennCare enrollees must be between 100 percent and 120 percent of the
Medicare reimbursement rate for the current federal fiscal year.
Authorizes the Director of the Division of TennCare (Division) to seek a federal waiver or other
authorization to implement such payment rate corridor without requiring the expansion of optional
Medicaid enrollment.
Requires the Division to provide an updated list of Medicare severity-diagnosis-related groups
(MS-DRGs) directly to participating rural hospitals each year.
FISCAL IMPACT:
STATE GOVERNMENT
EXPENDITURES General Fund
FY25-26 & Subsequent Years $594,800
FEDERAL GOVERNMENT
EXPENDITURES
FY25-26 & Subsequent Years $1,072,300
Assumptions:
• The proposed legislation applies to hospitals with no more than 49 licensed beds, operating
in an area that is not delineated as an urbanized area by the federal Census Bureau.
• Based on an analysis of the locations and bed numbers of hospitals in the state, it is
estimated that there are currently 13 rural hospitals that will be impacted by the established
reimbursement requirements.
• The proposed legislation sets the hospital payment rate corridor between 100 and 120
percent of the federal Medicare rate. It is assumed that the average reimbursement rate will
be 110 percent of the Medicare rate.
• According to an actuarial analysis by the Division, the total cost to increase the inpatient
reimbursement rate for the 13 rural hospitals to 110 percent of the Medicare rate is
estimated to be $1,667,117 per year.
HB 173 - SB 185 2
• Medicaid expenditures receive matching funds at a rate of 64.323 federal to 35.677 percent
state. Of this amount, $594,777 ($1,667,117 x 35.677%) will be in state expenditures and
$1,072,340 ($1,667,117 x 64.323%) will be in federal expenditures in FY25-26 and
subsequent years.
• The Division can provide an updated list of MS-DRGs to participating rural hospitals
utilizing existing resources, without an increase in expenditures.
IMPACT TO COMMERCE:
BUSINESS IMPACT
FISCAL YEAR REVENUE
FY25-26 & Subsequent Years $1,667,100
Assumptions:
• Rural hospitals will experience a recurring increase in business revenue of $1,667,117 in
FY25-26 and subsequent years.
• Any impact to jobs in Tennessee is estimated to be not significant
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director