LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
SENATE, No. 4656
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JULY 3, 2025
SUMMARY
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Synopsis: |
"Healthcare Finance Enhancement Act." |
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Type of Impact: |
Annual increase in State expenditures and revenues. |
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Agencies Affected: |
Department of Health. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Year 1 |
Years 2 and 3 |
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State Expenditure Increase |
Indeterminate |
Indeterminate |
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State Revenue Increase |
Minimum of $63.7 million |
Minimum of $63.8 million |
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· The Office of Legislative Services (OLS) determines that Department of Health costs will increase by an indeterminate amount for the department to hire additional staff to administer the changes to the ambulatory care facility assessment and the hospital admission charge under the bill, and to provide oversight of the facilities newly subject to these Medicaid provider taxes.
· The OLS concludes that the expansion of the ambulatory care facility assessment to currently-exempt facilities and the increase and expansion of the hospital admission charge will increase State revenues by $63.7 million in Year 1, and by $63.8 million in each of Year 2 and Year 3. Of this amount, approximately $42.7 million per year will be attributable to federal Medicaid matching funds.
· The Executive anticipates $73.0 million in additional revenues from the changes to the assessment on ambulatory care facilities and the expansion of the hospital admission charge. The OLS is unable to verify the Executive’s higher revenue estimate without access to certain data upon which this revenue estimate is based.
BILL DESCRIPTION
The bill reduces and expands the assessment imposed on ambulatory care facilities, and increases and expands the hospital admission charge.
Under current law, the Department of Health imposes a 2.95 percent assessment on the gross receipts of ambulatory care facilities with gross annual receipts over $300,000, with the total annual assessment capped at $350,000 per facility. Ambulatory care facilities reporting gross annual receipts below $300,000 and surgical practices, however, are exempt from the assessment. The assessments on ambulatory care facilities collected under this law are deposited in the Health Care Subsidy Fund.
This bill reduces the assessed rate on ambulatory care facilities from 2.95 percent to 2.5 percent and removes the statutory $350,000 cap on the assessment in FY 2026. The bill also newly extends the assessment to ambulatory care facilities reporting gross annual receipts below $300,000, beginning in FY 2027. The bill additionally eliminates the exemption from the ambulatory care facility assessment for surgical practices beginning in FY 2026.
The bill increases the per adjusted admission charge imposed on hospitals by the Department of Health from $10 to $12.50 beginning on July 1, 2025, and extends the imposition of this charge to include non-public psychiatric hospitals.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received. However, communications from the Office of Revenue and Economic Analysis in the Department of the Treasury anticipated that the changes to the ambulatory care facility assessment in the FY 2026 Governor’s Budget, when combined with regular trend changes, would increase Health Care Subsidy Fund revenues from the assessment by approximately $31.0 million in FY 2026. However, the FY 2026 Governor’s Budget anticipates $60.0 million in combined State and federal revenues from the recommended changes to the ambulatory care facility assessment, and shows a $34.6 million increase in revenues from the assessment accruing to the Health Care Subsidy Fund in FY 2026.
Although the department’s estimate assumes the reduction in the ambulatory care facility assessment rate from 2.95 percent to 2.5 percent, the removal of the $350,000 assessment cap, and the application of the assessment to ambulatory care facilities with gross annual receipts below $300,000, it does not appear to incorporate the application of the assessment to surgical practices beginning in FY 2026 or the delay in the application of the assessment to ambulatory care facilities with gross annual receipts below $300,000 until FY 2027, as provided under the bill.
The Department of Health, in response to FY 2026 OLS Discussion Point questions, anticipated that the recommended $2.50 increase in the hospital admission charge in FY 2026, when combined with the application of this charge to non-public psychiatric hospitals, would increase revenues by $13.0 million annually, with $8.0 million of this total from federal Medicaid revenues. So, combined with the $60.0 million in combined State and federal revenues from the changes to the ambulatory facility assessment, the Executive anticipates a total of $73.0 million in additional revenues from the proposed changes.
OFFICE OF LEGISLATIVE SERVICES
Based upon data provided by the Department of Health in response to a question posed during the April 3, 2025 Senate Budget Committee hearing, the OLS determines that the bill’s provisions will increase State revenues by a minimum of $63.7 million in Year 1. Of this amount, $21.0 million will reflect increased revenues collected under the ambulatory care facility assessment and the hospital admission charge. As the revenues generated under these fees are used to support Medicaid providers, federal Medicaid matching funds will comprise the remaining amount, or $42.7 million. In Years 2 and 3, the OLS concludes that the bill’s provisions will increase total revenues by a minimum of $63.8 million, of which $21.1 reflects increased fee revenues and $42.7 million is attributable to federal Medicaid matching funds.
The provisions affecting the ambulatory care facility assessment will constitute the majority of the revenue increase under the bill, or a minimum of $50.7 million in FY 2026 and a minimum of $50.8 million in both FY 2027 and FY 2028. The revenue increases under the bill will further increase by an indeterminate amount, depending upon the number of, and gross receipts reported by, surgical practices that will be newly subject to the assessment in FY 2026. Given that the number of the surgical practices that will be subject to the assessment and the gross annual receipts of these practices are not publicly available, the OLS lacks the informational basis to estimate the additional revenues attributable to this requirement.
The bill’s provisions increasing the hospital admission charge will increase revenues by $13.0 million annually, of which $8.7 million is attributable to federal Medicaid matching funds. Given that the number of admissions to private psychiatric hospitals, which will be newly subject to the charge under the bill, is not readily accessible, the additional revenues attributable to this provision are indeterminate. For context, a New Jersey Hospital Association fact sheet from March 2025 states that 17 psychiatric hospitals are currently operating in the State; however, the fact sheet does not indicate whether or not this figure includes the four State psychiatric hospitals and the four county-operated psychiatric hospitals.
The OLS additionally determines that Department of Health costs will increase by an indeterminate amount for the department to hire additional staff to administer the changes to the ambulatory care facility assessment and the hospital admission charge, and to provide oversight of the facilities newly subject to the requirements under the bill.
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Section: |
Human Services |
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Analyst: |
Senior Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).