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F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED 08/18/08 HB 19/aHAFC

SHORT TITLE Sole Community Provider Fund

SB

ANALYST Weber

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY09

FY10

$5,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY09

FY10

FY11

Up to $13 million

Recurring

Federal

Medicaid

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of HAFC Amendment to House Bill 19

The House Appropriations and Finance Committee amendment to House Bill 19 follows:

On page 1, line 21, after imposed strike the remainder of the line, strike all of lines 22,23 and 24

and strike line 25 through “1978” and insert in lieu thereof “the second one-eighth increment of

the county gross receipts tax.”

The amendment clarifies a contingency for qualifying for participation in the appropriation.

House Bill 19/aHAFC – Page

2

Synopsis of Original Bill

House Bill 19 appropriates $5 million from the General Fund to the Sole Community Provider

Fund to match federal funds available in the sole community provider supplemental allocation

for counties that are unable to fund fully the supplemental match for counties that are unable to

fund fully the supplemental match. Allocation of this appropriation is contingent on participating

counties having imposed all authorized gross receipts tax increments authorized by the County

Local Option Gross Receipts Taxes Act, the Indigent Hospital and County Health Care Act or

Section 4-38-17.1 NMSA 1978 but that still do not have sufficient revenue to match

FISCAL IMPLICATIONS

The appropriation of $5 million contained in this bill is a Recurring expense to the General Fund.

Any unexpended or unencumbered balance remaining at the end of FY09 shall revert to the

General Fund. The $13 million referred to as potential federal Medicaid revenue is the amount

that could be available if the entire $5 million appropriated in HB19 is used for this purpose and

the federal allotment is large enough to accommodate this matching level.

SIGNIFICANT ISSUES

The Sole Community Provider Program is a federal/state payment program designated for

hospitals that are the only hospital in a community. If a hospital is the only hospital in a

community and the sole source of care for individuals, then it will have unreimbursed operating

expenses. The Sole Community Provider Program was created as an acknowledgement that

hospitals and hospitals’ emergency rooms were often the care provider of last resort and that

costs associated with that situation would require additional reimbursement from the federal

government. The program was created primarily to promote access to Medicare and Medicaid

beneficiaries and also additional payments to sole community provider hospitals that had

experienced significant volume decrease, but whose access was critical to local residents.

Generally the county source of funding is from authorized gross receipts tax increments as

outlined in 7-20E-9 NMSA 1978 (see Appendix 1). Presently 27 counties are participants

helping a total of 27 hospitals in their respective regions. Some hospitals may be supported

through this program by more than one county. Only eight counties have imposed all the

available tax increments for the purpose of the indigent fund, a criterion for use of the $5 million.

A source of financial difficulty for some counties and concern for the regional hospitals is that

the potential federal participation level is increasing faster than the increase in local taxes. This

leads to a situation where if the county may not be able or willing to fully fund the Sole

Community Provider Program some federal monies may be left unmatched and therefore not

paid to the hospitals. Counties have responded with increased payments for the Community

Provider Fund and in FY07 jumped to $44.8 million, 54 percent of the indigent fund total from

$16.3 million, 36.3 percent of the total, just one year earlier. In FY06 the tax increments totaled

37.2 million and in FY08 $45.4 million, a respectable increase of 22 percent but far below the

corresponding Sole Community Provider Fund expenditure increase of 174 percent. However,

over these two years what is described as Other Revenues jumped from $10.9 million in FY06 to

$28.5 million in FY07. Other Revenues are defined as grants, penalties, reimbursement and

interest. Specific sources of the income are not available but the revenues do not appear to be

recurring or dependable. Two counties have provided county general fund to supplement the

total.

House Bill 19/aHAFC – Page

3

Note: The primary source of information regarding the county funds is the FY06 and FY07

County Financing of Health Care reports published by the Health Policy Commission.

TECHNICAL ISSUES

It may be advisable to more clearly define the phrase “but still do not have sufficient revenue to

match the supplemental sole community provider allocation.” Since indigent funds may be used

for a variety of purposes a county could decide to reallocate and take immediate benefit from the

$5 million. A potential criterion is that to participate in the $5 million a county’s Sole

Community Provider Hospital Fund contribution must not be a lower percentage of the fund total

than in prior years. This has the effect of maintenance of effort percentage.

Also, there is an inconsistency in that the Sole Community Provider Hospital fund is non-

reverting but HB 19 requires funds unused in FY09 shall revert to the general fund. It may be

advisable to appropriate to a reverting agency such as the Human Services Department or the

Department of Finance and Administration to make allocations to the fund as necessary to fulfill

the purpose of the appropriation.

BW/mt

Attachment