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TennesseeHB 1867114th General Assembly (2025-2026)House

AN ACT to amend Tennessee Code Annotated, Title 71, Chapter 5, relative to the annual coverage assessment.

Sponsored By: Sponsor information unavailable

Signed by Governor

Hospitals and Health Care Facilities

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Bill Overview

Analyzed Economic Effects

11 provisions identified: 4 benefits, 3 costs, 4 mixed.

Funding preserves TennCare services and training

Beginning July 1, 2026, trust-fund money and federal matching funds support TennCare benefits and services. The law prevents listed annual limits on hospital, outpatient, physician, laboratory, and imaging services and maintains occupational, physical, and speech therapy coverage. It keeps at least $48 million for graduate medical education and replaces specified reimbursement cuts dating back to FY 2011, except cuts later covered by recurring state funding. Hospital safety-net, charity-care, and quality payments must follow TennCare’s federal waiver. Another $612,007 maintains FY 2025–2026 emergency-care reimbursement rates for nonemergency care for children ages 12 through 24 months.

TennCare money stays protected after expiration

Assessment receipts go into the coverage trust fund and cannot replace existing appropriations or be diverted to the general fund. The fund also holds remaining June 30, 2026 balances, investment earnings, penalties, interest, and eligible hospital transfers. Quarterly legislative reports begin September 1, 2026, covering assessment determination status, fund balances, and fund use. The assessment part expires July 1, 2027, but the fund and TennCare’s duty to use its assets continue. Collection of unpaid assessments and penalties, required refunds, and hospitals’ and associations’ rights to seek declaratory orders also survive.

Eligible hospitals must transfer coverage funds

For FY 2026–2027, hospitals eligible to certify public spending for federal Medicaid matching funds must make transfers to the coverage trust fund. Combined transfers cannot exceed $300 million. TennCare sets each hospital’s share using Medicaid days and total outpatient payments in its 2021 joint annual report.

Covered hospitals pay a yearly assessment

Beginning July 1, 2026, covered hospitals owe an assessment for FY 2026–2027 totaling 6% of the recognized assessment base. The base generally uses 2021 net patient revenue minus Medicare revenue, with substitute calculations for missing reports and newer hospitals. Exemptions cover critical access and rural emergency hospitals, state mental health hospitals, certain hospitals without emergency departments, and hospitals eligible to certify public spending for federal matching funds. Collection requires federal approval protecting Medicaid matching funds, approval of planned hospital payments or the specified alternative rule process, and state funding meeting the governor’s recommended budget plus added appropriations, unless new federal funding replaces it. Hospitals must submit missing 2021 Medicare cost reports when no alternative base calculation applies.

Hospital funding comes with federal limits

For FY 2026–2027, TennCare makes federally approved hospital payments using claims and patient-use data, available funding, and a jointly designed quality program. If federal officials approve supplemental pools instead, payments first offset covered hospitals’ losses from treating TennCare members. The hospital association receives each hospital’s payment schedule at least seven days before payment. Under the assessment contingency, payments are limited to FY 2024 levels or a higher TennCare-approved amount within the federal ceiling until required approvals and written notice arrive. Funding also covers public hospital shortfalls, and TennCare can develop additional cost-offset programs with the hospital association. Those programs address unpaid TennCare costs and public-health-emergency effects, using state money to secure federal matching funds for total funding up to $350 million.

Provider rates protected; funding can stop

TennCare must bar health plans from across-the-board cuts to negotiated hospital and physician rates in effect July 1, 2026. The protection covers eligible ancillary services and care settings, but allows case-by-case negotiations, specified ancillary changes announced in advance, legally required changes, and changes allowed when the assessment becomes invalid. An invalid federal assessment ruling, failure of required funding, or prohibited rate cuts stops later assessment installments and specified hospital payments. If federal officials reject or discontinue the full directed-payment amount, TennCare must suspend payments to and from covered hospitals. TennCare must adopt replacement-payment rules covering priorities, benefits, amounts, timing, and how payments resume.

Hospital type determines assessment shares

Hospitals’ assessment shares depend on classifications using the 2023 joint annual report. Primary inpatient/outpatient weights are: children’s, 0.8/0.3; tier 1, 1.0/0.5; tier 2, 0.75/0.3; tier 3, 0.151/0.175; psychiatric, 0.11/0.5; safety net, 0.133/0.157; and high out-of-state Medicaid, 0.151/0.1; other eligible hospitals have a 6% weight. If federal officials reject that structure, backup weights change tier 1 to 1.0/0.55, tier 3 to 0.15/0.175, and psychiatric hospitals to 0.11/1.0; children’s, tier 2, safety-net, and other eligible hospital weights stay the same, without a separate high out-of-state category. High out-of-state status requires more than 15% of Medicaid visits to come from out of state; hospitals sharing one license and Medicare number combine visits. After consulting the hospital association, TennCare can change individual percentages only to meet federal assessment rules or address added state appropriations.

Hospitals face penalties but get refunds

Hospital assessment installments are spread as evenly as possible across FY 2026–2027 and are due 15 days after corresponding federally approved hospital payments. Late payments carry a $500 daily penalty until paid; TennCare can waive it for a proven timely payment attempt. After 30 days past due, TennCare must suspend specified hospital payments and notify licensing officials; unpaid installments or required refunds can lead to license discipline and civil collection against hospitals and controlling persons. Closures and changes to exempt status reduce assessments based on days covered, but controlling persons remain liable for unpaid amounts when a hospital closes. Sellers owe through the sale date, and qualifying new owners owe afterward; hospitals moving from exempt to covered status have proportional assessment and transfer duties when they previously contributed transfers. TennCare must give proportional refunds for mistaken or invalid payments, or when it and the hospital association determine a lower assessment was sufficient.

Patients protected from assessment surcharges

Covered hospitals cannot raise charges or add a surcharge because of the annual coverage assessment. This protects patients from charges tied to the assessment, but does not set limits on unrelated hospital charges.

Targeted funding helps hospitals and providers

Beginning July 1, 2026, the trust fund provides $21.391431 million to offset removal of the requirement that providers pass 340B drug-pricing benefits to TennCare health plans. It provides $175,000 toward hospital admission, discharge, and transfer messages supporting TennCare’s medical home program. Another $1.4267 million funds stipends for providers who commit to work in designated underserved Tennessee areas. Critical access hospitals receive $3 million for unpaid charity care, drawn only from balances remaining on June 30, 2026. These allocations fall within the assessment part that expires July 1, 2027.

TennCare fund pays staffing and audits

Beginning July 1, 2026, the trust fund provides $382,400 for six full-time state employees managing hospital payment programs. It also provides $1.6 million for a program manager contract. The state comptroller can audit trust-fund spending using an accountant or the Department of Audit, but an audit is not required. TennCare and the trust fund pay the full cost of any audit.

Sponsors & Cosponsors

Sponsors

There is no primary sponsor on record.

Cosponsors

  • Rebecca K. Alexander

    Republican • House

  • Michael Hale

    Republican • House

  • William Lamberth

    Republican • House

Roll Call Votes

All Roll Calls

Yes: 183 • No: 0

Senate vote • 4/15/2026

FLOOR VOTE: Third Consideration 4/15/2026

Yes: 33 • No: 0

House vote • 4/6/2026

HOUSE CALENDAR & RULES COMMITTEE

Yes: 0 • No: 0

House vote • 4/6/2026

FLOOR VOTE: REGULAR CALENDAR AS AMENDED PASSAGE ON THIRD CONSIDERATION 4/6/2026

Yes: 92 • No: 0

House vote • 3/31/2026

HOUSE FINANCE, WAYS, AND MEANS COMMITTEE

Yes: 25 • No: 0

House vote • 3/25/2026

HOUSE FINANCE, WAYS, AND MEANS SUBCOMMITTEE

Yes: 12 • No: 0

House vote • 3/17/2026

HOUSE INSURANCE COMMITTEE

Yes: 16 • No: 0

House vote • 3/3/2026

HOUSE TENNCARE SUBCOMMITTEE

Yes: 5 • No: 0

Actions Timeline

  1. Effective date(s) 07/01/2026

    5/26/2026

  2. Pub. Ch. 991

    5/26/2026

  3. Signed by Governor.

    5/19/2026

  4. Transmitted to Governor for his action.

    5/7/2026House

  5. Signed by Senate Speaker

    5/5/2026Senate

  6. Signed by H. Speaker

    4/30/2026House

  7. Enrolled; ready for sig. of H. Speaker.

    4/20/2026House

  8. Passed Senate, Ayes 33, Nays 0

    4/15/2026Senate

  9. Amendment withdrawn. (Amendment 1 - SA0536)

    4/15/2026Senate

  10. Senate substituted House Bill for companion Senate Bill.

    4/15/2026Senate

  11. Received from House, Passed on First Consideration

    4/9/2026Senate

  12. Engrossed; ready for transmission to Sen.

    4/6/2026House

  13. Passed H., as am., Ayes 92, Nays 0, PNV 0

    4/6/2026House

  14. Sponsor(s) Added.

    4/6/2026House

  15. H. adopted am. (Amendment 1 - HA0698)

    4/6/2026House

  16. Sponsor(s) Added.

    4/2/2026House

  17. H. Placed on Regular Calendar for 4/6/2026

    4/2/2026House

  18. Placed on cal. Calendar & Rules Committee for 4/2/2026

    4/1/2026House

  19. Rec. for pass; ref to Calendar & Rules Committee

    3/31/2026House

  20. Placed on cal. Finance, Ways, and Means Committee for 3/31/2026

    3/25/2026House

  21. Rec. for pass by s/c ref. to Finance, Ways, and Means Committee

    3/25/2026House

  22. Placed on s/c cal Finance, Ways, and Means Subcommittee for 3/25/2026

    3/18/2026House

  23. Assigned to s/c Finance, Ways, and Means Subcommittee

    3/17/2026House

  24. Rec. for pass. if am., ref. to Finance, Ways, and Means Committee

    3/17/2026House

  25. Placed on cal. Insurance Committee for 3/17/2026

    3/11/2026House

Bill Text

  • HA0698 (Substitute)

    4/6/2026

    PDF

  • Enrolled / Public Chapter

    PDF

  • Fiscal Note

    PDF

  • Introduced

    PDF

  • SA0536

    PDF

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