SPONSOR:	Rep. Gilligan Sen. Still
	Keeley Oberle	DeLuca Cook Blevins

HOUSE OF REPRESENTATIVES

144th GENERAL ASSEMBLY

HOUSE BILL NO. 512

AN ACT TO AMEND TITLE 16 AND 30 OF THE DELAWARE CODE RELATING TO HOSPITALS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three-fifths of all members elected to each house thereof concurring therein):

Section 1.  Amend Chapter 10 of Title 16 of the Delaware Code to strike Section 1001(2) in its entirety and insert in lieu thereof the following:

(2) “Hospital” means a health care organization that has a governing body, an organized medical and professional staff, inpatient facilities and provides 24 hours per day, seven days per week either medical diagnosis, treatment and care, nursing and related services for ill and injured patients; or rehabilitation services for the rehabilitation of ill, injured or disabled patients.  Hospitals are further classified as:

a. Acute Care - providing diverse inpatient services for those patients who experience physiological instability that cannot be handled safely or competently in another setting.

b. Long Term Care - providing inpatient services for those patients whose medically complex conditions require a long hospital stay with an average length of stay of greater than 25 days.

c. Psychiatric - providing inpatient services for the diagnosis and treatment of those patients with mental illness.

d.  Rehabilitation - providing intensive inpatient rehabilitative services for one or more conditions requiring rehabilitation.

Section 2. Amend §501 of Title 30 of the Delaware Code by striking the phrase “61 and 63 of this title” as it appears in that section immediately before the semicolon in that section and replacing the phrase with the phrase “61, 63 and 65 of this title”.

Section 3. Amend Title 30 of the Delaware Code by adding a new Chapter 65 to that Title as follows:

“Chapter 65. Health Care Related Taxes.

Subchapter I. Hospital Tax.

§6501. Definitions.

As used in this subchapter:

(1) 'CMS' means the Center for Medicare and Medicaid Services of the United States Department of Health and Human Services.

(2) ‘Hospital' means an acute care hospital that is licensed by the Delaware Division of Public Health under title 16 of the Delaware Code; provided however, that the term does not include an entity operated by the United States, its agencies or instrumentalities, this State and its political subdivisions or agencies or instrumentalities of this State or its political subdivisions.

(3) ‘Net patient revenues' means with respect to specified hospital services, the amount reported by a hospital as 'Net Patient Revenues' on the Medicare Hospital Cost Report (CMS-2552-96) most recently filed by the hospital with CMS as of June 1, 2008.

(4) 'Specified hospital services' means:

a. inpatient hospital services, as that term is used in 42 U.S.C. §1396b(w)(7)(A)(i), as amended, and 42 C.F.R. §433.56(a)(1) , as amended; and,

b. outpatient hospital services, as that term is used in 42 U.S.C. §1396b(w)(7)(A)(ii),  as amended, and 42 C.F.R. §433.56(a)(2) , as amended.

(5) 'Taxable year' means a fiscal year beginning on July 1 of each calendar year and ending on June 30 of the succeeding calendar year.

§6502. Hospital tax; statements required.

(a) Any hospital engaged in this State in providing specified hospital services, whether on a for-profit or non-profit basis, shall pay an annual tax equal to 1.95% of net patient revenues of the hospital.

(b) The annual tax imposed by subsection (a) of this §6502 shall be payable in four equal installments, each consisting of 25% of the annual tax payable, on returns prescribed by the Department of Finance. Payments shall be due on September 1, December 1, March 1 and June 1 of each taxable year; provided however, that for the taxable year beginning on July 1, 2008, payments shall be due on December 1, 2008, February 1, 2009, April 1, 2009 and June 1, 2009.

(c) The Department of Finance shall, no later than the last day of the month in which the tax is collected, transfer all taxes collected under §6502(a) of this title to the Medical Assistance Trust Fund within the Department of Health and Social Services.

§6503. Repeal in certain circumstances; sunset date.

(a) The tax imposed by §6502 shall be repealed, and no further obligation to pay the tax shall continue, if

(i) CMS determines that the tax imposed by §6502 is impermissible under Title XIX of the Social Security Act; or

(ii) CMS does not permit the State to use the tax collected pursuant to §6502 to be used for the State's share of Medicaid program expenditures without the loss of Federal matching funds.

(b) If not earlier repealed under subsection (a) of this §6503, the tax imposed by §6502 shall be repealed, and no further obligation to pay the tax shall continue, for taxable years beginning after June 30, 2011.”

Section 4. Sections 1 and 2 of this Act shall become effective upon enactment.  Section 3 of this Act shall be effective for taxable years beginning after June 30, 2008.

SYNOPSIS

Section 1 of the act clarifies the definition of hospitals.

Section 2 of the act amends §501 of Title 30 to apply the existing procedural rules used by the Department of Finance to the new tax being added by the act.

Section 3 of the act imposes a new, broad-based, annual tax on hospitals, based on their Net Patient Revenues, as reported in the Medicare Hospital Cost Report most recently submitted by hospitals to the Center for Medicaid and Medicare Services (CMS) on or before June 1, 2008.  The tax is 1.95% of Net Patient Revenues and is based on the fiscal year of the State, which begins on July 1 and ends on June 30.  The annual tax is payable in quarterly installments.  Payments during the first taxable year, July 1, 2008 until June 30, 2009, are adjusted to allow for implementation of the new tax, with payments due on December 1, 2008, February 1, 2009, April 1, 2009 and June 1, 2009.  Thereafter, payments will be due at the beginning of calendar quarters.

The act applies to all hospitals defined in the legislation providing specified hospital services who receive payment for such services from any source.  

The tax will be imposed on hospitals' Net Patient Revenues from inpatient and outpatient hospital services as allowed in the federal Social Security Act, 42 U.S.C. §1396b(w)(7) and the regulations under that statute, 42 C.F.R. §433.56(a).

The proceeds of the tax will be deposited into the Medical Assistance Trust Fund administered by the Department of Health and Social Services.  The tax will be automatically repealed if federal matching funds are not available due to the impermissibility of the tax, as determined by CMS.  The tax is considered a pilot hospital tax and will be repealed automatically regardless of any action by CMS at the end of the taxable year ending on June 30, 2011.