Franchise Fee

On July 17, 2009, Governor Ted Strickland signed into law Ohio’s fiscal year 2010-2011 state budget, which runs from July 2009 through June 2011. Given the difficult economic environment facing the state, cuts in government spending in the amount of about $4 billion were implemented and $1.1 billion in new fees were created.

These new fees included a hospital franchise fee. Based on a percentage of operating expenses for each hospital, the hospital franchise fee is expected to raise $718 million over the biennium, which will be matched by almost $1.74 billion in federal funding.

The budget legislation promised to return a portion of that funding to hospitals through various means, including a Medicaid reimbursement increase and additional supplemental Medicaid payments through a federal program called the upper payment limit (UPL). The net impact of the franchise fee is a $143.5 million shortfall for hospitals over the biennium.
Last Updated: August 2010