New Jersey has proposed additional legislation (A4091 and S2729) to adopt the state’s County Option Hospital Fee Pilot Program on a permanent basis. The proposed legislation is currently being reviewed by the Senate Budget and Appropriations Committee and it is anticipated it will be enacted, expanding the program from the current seven participating counties (Atlantic, Camden, Essex, Hudson, Mercer, Middlesex, and Passaic) to include five counties (Bergen, Burlington, Cumberland, Monmouth, and Ocean).

By way of background, New Jersey adopted the County Option Hospital Fee Pilot Program Act on November 1, 2018. The goals of the pilot program are (1) to increase financial resources through the Medicaid program to support local hospitals and ensure they continue to provide necessary services to low-income citizens; and (2) to provide participating counties with new fiscal resources.

Under the pilot program, the initial seven participating counties are authorized to impose a local healthcare related fee on hospitals within their borders. The funds collected from the fee are subject to a federal match, provided they do not exceed the federal Department of Human Services (DHS) limit.

At least 90% of the funds collected from the fee imposed are to be used for the benefit of hospitals within the county to ensure they continue to provide necessary services to low-income citizens. Specifically, such funds may be used to: (1) increase Medicaid/NJ FamilyCare payments to hospitals in the county; (2) make payments to Medicaid/NJ FamilyCare managed care organizations operating in the participating county for increased hospital or hospital-related payments; and/or (3) pay costs directly related to the administration of the pilot program.

As a pilot program, the County Option was intended to last only five years, which would begin to run 180 days after its November 1, 2018 enactment.  However, due to delays in obtaining federal approval of the program, in 2021, the State Legislature clarified that the five-year period would not begin to run until each participating county had begun to collect the healthcare related fee.  The pilot program is now scheduled to expire in the fall of 2026. However, the proposed legislation would make the program permanent.

Hospitals in Bergen, Burlington, Cumberland, Monmouth and Ocean counties should pay close attention to this proposed expansion of the program and begin analyzing the potential impact on their Medicaid reimbursement.