Hospital Franchise Fee: Overview

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 franchise fee for hospitals.  Based on a percentage of operating expenses for each hospital, the 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 is a $143.5 million shortfall for hospitals over the biennium.