Tennessee requires hospital fees with federal approval and funding safeguards

Covered hospitals must pay annual fees once the federal approval and TennCare funding requirements are met. The fees cover nonexempt hospitals licensed as of July 1, 2026. Each hospital's share depends on its type and revenue records, with an alternative formula if federal officials reject the main formula. TennCare must notify the Tennessee Hospital Association that federal officials accept the fee as a funding source and approve hospital payments, or that replacement payment rules apply. TennCare coverage and funding must meet the governor's recommended budget plus added state funding, except where specified extra federal money replaces state funding. Exemptions cover federally designated critical access and rural emergency hospitals, state-owned mental health hospitals, and hospitals eligible to use public spending to obtain federal matching money. Hospitals without an emergency department covered by federal emergency-care law are also exempt, unless licensed as mental health hospitals. Covered hospitals cannot raise charges or add a surcharge because of the fee. The law took effect July 1, 2026. These provisions expire July 1, 2027, with certain collection rights and duties continuing.

TennCare must use hospital fee revenue and federal matching money for the health coverage and payment purposes listed in the law. The money supports TennCare services and payments for hospitals treating TennCare patients and uninsured people. It helps maintain coverage for care such as hospital visits, tests, and therapy. Hospital payments depend on federal approval and available money. If federal officials approve replacement payment pools, covered hospitals' losses from treating TennCare patients receive first priority. If federal officials reject or withdraw approval of the full hospital payments, TennCare must suspend payments from and to covered hospitals and set replacement payment rules. The money cannot replace other state funding or go to the state's general fund. Hospital payments use paid claims data from each quarter of July 2026 through June 2027. Duties to use the fund for its stated purposes continue after July 1, 2027.

TennCare must charge late-payment penalties and suspend specified hospital payments when fee installments remain unpaid. These rules apply to covered hospitals that owe fee installments. TennCare may waive the daily penalty if a hospital shows it tried to mail or electronically transfer payment on or before the due date. Nonpayment is grounds for hospital license discipline. TennCare may sue hospitals and people who control them to collect unpaid fees, penalties, and required refunds. Installments are due 15 days after approved hospital payments are made. Suspended payments resume when the installment is paid. Collection powers and late-payment penalties continue after July 1, 2027.

TennCare must require its managed care insurers to bar across-the-board cuts to protected hospital and physician payment rates. The protection covers network hospitals and physicians, including related services in which the provider, its subsidiary, or its controlled affiliate holds more than a 50% controlling interest. Insurers and providers may still negotiate individual rate changes in good faith. Related services may face cuts if they are outside the funded items and lawmakers and the Tennessee Hospital Association receive advance notice. The protection allows rate changes mandated by TennCare or state or federal law when federal requirements or legal changes require them, or when the hospital fee becomes invalid. The protection covers negotiated rates in effect on July 1, 2026. These provisions expire July 1, 2027.