Bill Text: IL SB1040 | 2021-2022 | 102nd General Assembly | Chaptered

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Bill Title: Amends the Medical Assistance Article of the Illinois Public Aid Code. In a provision concerning rates for inpatient services, requires the Department of Healthcare and Family Services to make adjustment payments to a hospital that reopens a previously closed hospital facility within 3 calendar years of the hospital facility's closure, if the previously closed hospital facility qualified for certain inpatient adjustment payments at the time of closure, until utilization data for the new facility is available for the Medicaid inpatient utilization rate calculation. Provides that a "closed hospital facility" shall include hospitals that have been terminated from participation in the medical assistance program. Provides that qualifying hospitals shall have the payment rate assigned to the previously closed hospital facility at the date of closure, until utilization data for the new facility is available for the Medicaid inpatient utilization rate calculation. In a provision requiring the Department to develop add-on payments that are consistent with Medicare outlier principles, provides that outlier fixed loss thresholds may be updated to control for excessive growth in outlier payments no more frequently than on an annual basis, but at least once every 4 years (rather than triennially). Requires the Department to update certain reimbursement components at least once every 4 years (rather than triennially). Effective immediately.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Passed) 2021-12-10 - Public Act . . . . . . . . . 102-0682 [SB1040 Detail]

Download: Illinois-2021-SB1040-Chaptered.html

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Public Act 102-0682
SB1040 Enrolled LRB102 04858 KTG 14877 b
AN ACT concerning public aid.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Public Aid Code is amended by
changing Sections 5-5.02 and 14-12 as follows:
(305 ILCS 5/5-5.02) (from Ch. 23, par. 5-5.02)
Sec. 5-5.02. Hospital reimbursements.
(a) Reimbursement to hospitals; July 1, 1992 through
September 30, 1992. Notwithstanding any other provisions of
this Code or the Illinois Department's Rules promulgated under
the Illinois Administrative Procedure Act, reimbursement to
hospitals for services provided during the period July 1, 1992
through September 30, 1992, shall be as follows:
(1) For inpatient hospital services rendered, or if
applicable, for inpatient hospital discharges occurring,
on or after July 1, 1992 and on or before September 30,
1992, the Illinois Department shall reimburse hospitals
for inpatient services under the reimbursement
methodologies in effect for each hospital, and at the
inpatient payment rate calculated for each hospital, as of
June 30, 1992. For purposes of this paragraph,
"reimbursement methodologies" means all reimbursement
methodologies that pertain to the provision of inpatient

hospital services, including, but not limited to, any
adjustments for disproportionate share, targeted access,
critical care access and uncompensated care, as defined by
the Illinois Department on June 30, 1992.
(2) For the purpose of calculating the inpatient
payment rate for each hospital eligible to receive
quarterly adjustment payments for targeted access and
critical care, as defined by the Illinois Department on
June 30, 1992, the adjustment payment for the period July
1, 1992 through September 30, 1992, shall be 25% of the
annual adjustment payments calculated for each eligible
hospital, as of June 30, 1992. The Illinois Department
shall determine by rule the adjustment payments for
targeted access and critical care beginning October 1,
1992.
(3) For the purpose of calculating the inpatient
payment rate for each hospital eligible to receive
quarterly adjustment payments for uncompensated care, as
defined by the Illinois Department on June 30, 1992, the
adjustment payment for the period August 1, 1992 through
September 30, 1992, shall be one-sixth of the total
uncompensated care adjustment payments calculated for each
eligible hospital for the uncompensated care rate year, as
defined by the Illinois Department, ending on July 31,
1992. The Illinois Department shall determine by rule the
adjustment payments for uncompensated care beginning

October 1, 1992.
(b) Inpatient payments. For inpatient services provided on
or after October 1, 1993, in addition to rates paid for
hospital inpatient services pursuant to the Illinois Health
Finance Reform Act, as now or hereafter amended, or the
Illinois Department's prospective reimbursement methodology,
or any other methodology used by the Illinois Department for
inpatient services, the Illinois Department shall make
adjustment payments, in an amount calculated pursuant to the
methodology described in paragraph (c) of this Section, to
hospitals that the Illinois Department determines satisfy any
one of the following requirements:
(1) Hospitals that are described in Section 1923 of
the federal Social Security Act, as now or hereafter
amended, except that for rate year 2015 and after a
hospital described in Section 1923(b)(1)(B) of the federal
Social Security Act and qualified for the payments
described in subsection (c) of this Section for rate year
2014 provided the hospital continues to meet the
description in Section 1923(b)(1)(B) in the current
determination year; or
(2) Illinois hospitals that have a Medicaid inpatient
utilization rate which is at least one-half a standard
deviation above the mean Medicaid inpatient utilization
rate for all hospitals in Illinois receiving Medicaid
payments from the Illinois Department; or

(3) Illinois hospitals that on July 1, 1991 had a
Medicaid inpatient utilization rate, as defined in
paragraph (h) of this Section, that was at least the mean
Medicaid inpatient utilization rate for all hospitals in
Illinois receiving Medicaid payments from the Illinois
Department and which were located in a planning area with
one-third or fewer excess beds as determined by the Health
Facilities and Services Review Board, and that, as of June
30, 1992, were located in a federally designated Health
Manpower Shortage Area; or
(4) Illinois hospitals that:
(A) have a Medicaid inpatient utilization rate
that is at least equal to the mean Medicaid inpatient
utilization rate for all hospitals in Illinois
receiving Medicaid payments from the Department; and
(B) also have a Medicaid obstetrical inpatient
utilization rate that is at least one standard
deviation above the mean Medicaid obstetrical
inpatient utilization rate for all hospitals in
Illinois receiving Medicaid payments from the
Department for obstetrical services; or
(5) Any children's hospital, which means a hospital
devoted exclusively to caring for children. A hospital
which includes a facility devoted exclusively to caring
for children shall be considered a children's hospital to
the degree that the hospital's Medicaid care is provided

to children if either (i) the facility devoted exclusively
to caring for children is separately licensed as a
hospital by a municipality prior to February 28, 2013;
(ii) the hospital has been designated by the State as a
Level III perinatal care facility, has a Medicaid
Inpatient Utilization rate greater than 55% for the rate
year 2003 disproportionate share determination, and has
more than 10,000 qualified children days as defined by the
Department in rulemaking; (iii) the hospital has been
designated as a Perinatal Level III center by the State as
of December 1, 2017, is a Pediatric Critical Care Center
designated by the State as of December 1, 2017 and has a
2017 Medicaid inpatient utilization rate equal to or
greater than 45%; or (iv) the hospital has been designated
as a Perinatal Level II center by the State as of December
1, 2017, has a 2017 Medicaid Inpatient Utilization Rate
greater than 70%, and has at least 10 pediatric beds as
listed on the IDPH 2015 calendar year hospital profile; or
.
(6) A hospital that reopens a previously closed
hospital facility within 3 calendar years of the hospital
facility's closure, if the previously closed hospital
facility qualified for payments under paragraph (c) at the
time of closure, until utilization data for the new
facility is available for the Medicaid inpatient
utilization rate calculation. For purposes of this clause,

a "closed hospital facility" shall include hospitals that
have been terminated from participation in the medical
assistance program in accordance with Section 12-4.25 of
this Code.
(c) Inpatient adjustment payments. The adjustment payments
required by paragraph (b) shall be calculated based upon the
hospital's Medicaid inpatient utilization rate as follows:
(1) hospitals with a Medicaid inpatient utilization
rate below the mean shall receive a per day adjustment
payment equal to $25;
(2) hospitals with a Medicaid inpatient utilization
rate that is equal to or greater than the mean Medicaid
inpatient utilization rate but less than one standard
deviation above the mean Medicaid inpatient utilization
rate shall receive a per day adjustment payment equal to
the sum of $25 plus $1 for each one percent that the
hospital's Medicaid inpatient utilization rate exceeds the
mean Medicaid inpatient utilization rate;
(3) hospitals with a Medicaid inpatient utilization
rate that is equal to or greater than one standard
deviation above the mean Medicaid inpatient utilization
rate but less than 1.5 standard deviations above the mean
Medicaid inpatient utilization rate shall receive a per
day adjustment payment equal to the sum of $40 plus $7 for
each one percent that the hospital's Medicaid inpatient
utilization rate exceeds one standard deviation above the

mean Medicaid inpatient utilization rate; and
(4) hospitals with a Medicaid inpatient utilization
rate that is equal to or greater than 1.5 standard
deviations above the mean Medicaid inpatient utilization
rate shall receive a per day adjustment payment equal to
the sum of $90 plus $2 for each one percent that the
hospital's Medicaid inpatient utilization rate exceeds 1.5
standard deviations above the mean Medicaid inpatient
utilization rate; and .
(5) Hospitals qualifying under clause (6) of paragraph
(b) shall have the rate assigned to the previously closed
hospital facility at the date of closure, until
utilization data for the new facility is available for the
Medicaid inpatient utilization rate calculation.
(d) Supplemental adjustment payments. In addition to the
adjustment payments described in paragraph (c), hospitals as
defined in clauses (1) through (6) (5) of paragraph (b),
excluding county hospitals (as defined in subsection (c) of
Section 15-1 of this Code) and a hospital organized under the
University of Illinois Hospital Act, shall be paid
supplemental inpatient adjustment payments of $60 per day. For
purposes of Title XIX of the federal Social Security Act,
these supplemental adjustment payments shall not be classified
as adjustment payments to disproportionate share hospitals.
(e) The inpatient adjustment payments described in
paragraphs (c) and (d) shall be increased on October 1, 1993

and annually thereafter by a percentage equal to the lesser of
(i) the increase in the DRI hospital cost index for the most
recent 12 month period for which data are available, or (ii)
the percentage increase in the statewide average hospital
payment rate over the previous year's statewide average
hospital payment rate. The sum of the inpatient adjustment
payments under paragraphs (c) and (d) to a hospital, other
than a county hospital (as defined in subsection (c) of
Section 15-1 of this Code) or a hospital organized under the
University of Illinois Hospital Act, however, shall not exceed
$275 per day; that limit shall be increased on October 1, 1993
and annually thereafter by a percentage equal to the lesser of
(i) the increase in the DRI hospital cost index for the most
recent 12-month period for which data are available or (ii)
the percentage increase in the statewide average hospital
payment rate over the previous year's statewide average
hospital payment rate.
(f) Children's hospital inpatient adjustment payments. For
children's hospitals, as defined in clause (5) of paragraph
(b), the adjustment payments required pursuant to paragraphs
(c) and (d) shall be multiplied by 2.0.
(g) County hospital inpatient adjustment payments. For
county hospitals, as defined in subsection (c) of Section 15-1
of this Code, there shall be an adjustment payment as
determined by rules issued by the Illinois Department.
(h) For the purposes of this Section the following terms

shall be defined as follows:
(1) "Medicaid inpatient utilization rate" means a
fraction, the numerator of which is the number of a
hospital's inpatient days provided in a given 12-month
period to patients who, for such days, were eligible for
Medicaid under Title XIX of the federal Social Security
Act, and the denominator of which is the total number of
the hospital's inpatient days in that same period.
(2) "Mean Medicaid inpatient utilization rate" means
the total number of Medicaid inpatient days provided by
all Illinois Medicaid-participating hospitals divided by
the total number of inpatient days provided by those same
hospitals.
(3) "Medicaid obstetrical inpatient utilization rate"
means the ratio of Medicaid obstetrical inpatient days to
total Medicaid inpatient days for all Illinois hospitals
receiving Medicaid payments from the Illinois Department.
(i) Inpatient adjustment payment limit. In order to meet
the limits of Public Law 102-234 and Public Law 103-66, the
Illinois Department shall by rule adjust disproportionate
share adjustment payments.
(j) University of Illinois Hospital inpatient adjustment
payments. For hospitals organized under the University of
Illinois Hospital Act, there shall be an adjustment payment as
determined by rules adopted by the Illinois Department.
(k) The Illinois Department may by rule establish criteria

for and develop methodologies for adjustment payments to
hospitals participating under this Article.
(l) On and after July 1, 2012, the Department shall reduce
any rate of reimbursement for services or other payments or
alter any methodologies authorized by this Code to reduce any
rate of reimbursement for services or other payments in
accordance with Section 5-5e.
(m) The Department shall establish a cost-based
reimbursement methodology for determining payments to
hospitals for approved graduate medical education (GME)
programs for dates of service on and after July 1, 2018.
(1) As used in this subsection, "hospitals" means the
University of Illinois Hospital as defined in the
University of Illinois Hospital Act and a county hospital
in a county of over 3,000,000 inhabitants.
(2) An amendment to the Illinois Title XIX State Plan
defining GME shall maximize reimbursement, shall not be
limited to the education programs or special patient care
payments allowed under Medicare, and shall include:
(A) inpatient days;
(B) outpatient days;
(C) direct costs;
(D) indirect costs;
(E) managed care days;
(F) all stages of medical training and education
including students, interns, residents, and fellows

with no caps on the number of persons who may qualify;
and
(G) patient care payments related to the
complexities of treating Medicaid enrollees including
clinical and social determinants of health.
(3) The Department shall make all GME payments
directly to hospitals including such costs in support of
clients enrolled in Medicaid managed care entities.
(4) The Department shall promptly take all actions
necessary for reimbursement to be effective for dates of
service on and after July 1, 2018 including publishing all
appropriate public notices, amendments to the Illinois
Title XIX State Plan, and adoption of administrative rules
if necessary.
(5) As used in this subsection, "managed care days"
means costs associated with services rendered to enrollees
of Medicaid managed care entities. "Medicaid managed care
entities" means any entity which contracts with the
Department to provide services paid for on a capitated
basis. "Medicaid managed care entities" includes a managed
care organization and a managed care community network.
(6) All payments under this Section are contingent
upon federal approval of changes to the Illinois Title XIX
State Plan, if that approval is required.
(7) The Department may adopt rules necessary to
implement Public Act 100-581 through the use of emergency

rulemaking in accordance with subsection (aa) of Section
5-45 of the Illinois Administrative Procedure Act. For
purposes of that Act, the General Assembly finds that the
adoption of rules to implement Public Act 100-581 is
deemed an emergency and necessary for the public interest,
safety, and welfare.
(Source: P.A. 100-580, eff. 3-12-18; 100-581, eff. 3-12-18;
101-81, eff. 7-12-19.)
(305 ILCS 5/14-12)
Sec. 14-12. Hospital rate reform payment system. The
hospital payment system pursuant to Section 14-11 of this
Article shall be as follows:
(a) Inpatient hospital services. Effective for discharges
on and after July 1, 2014, reimbursement for inpatient general
acute care services shall utilize the All Patient Refined
Diagnosis Related Grouping (APR-DRG) software, version 30,
distributed by 3MTM Health Information System.
(1) The Department shall establish Medicaid weighting
factors to be used in the reimbursement system established
under this subsection. Initial weighting factors shall be
the weighting factors as published by 3M Health
Information System, associated with Version 30.0 adjusted
for the Illinois experience.
(2) The Department shall establish a
statewide-standardized amount to be used in the inpatient

reimbursement system. The Department shall publish these
amounts on its website no later than 10 calendar days
prior to their effective date.
(3) In addition to the statewide-standardized amount,
the Department shall develop adjusters to adjust the rate
of reimbursement for critical Medicaid providers or
services for trauma, transplantation services, perinatal
care, and Graduate Medical Education (GME).
(4) The Department shall develop add-on payments to
account for exceptionally costly inpatient stays,
consistent with Medicare outlier principles. Outlier fixed
loss thresholds may be updated to control for excessive
growth in outlier payments no more frequently than on an
annual basis, but at least once every 4 years triennially.
Upon updating the fixed loss thresholds, the Department
shall be required to update base rates within 12 months.
(5) The Department shall define those hospitals or
distinct parts of hospitals that shall be exempt from the
APR-DRG reimbursement system established under this
Section. The Department shall publish these hospitals'
inpatient rates on its website no later than 10 calendar
days prior to their effective date.
(6) Beginning July 1, 2014 and ending on June 30,
2024, in addition to the statewide-standardized amount,
the Department shall develop an adjustor to adjust the
rate of reimbursement for safety-net hospitals defined in

Section 5-5e.1 of this Code excluding pediatric hospitals.
(7) Beginning July 1, 2014, in addition to the
statewide-standardized amount, the Department shall
develop an adjustor to adjust the rate of reimbursement
for Illinois freestanding inpatient psychiatric hospitals
that are not designated as children's hospitals by the
Department but are primarily treating patients under the
age of 21.
(7.5) (Blank).
(8) Beginning July 1, 2018, in addition to the
statewide-standardized amount, the Department shall adjust
the rate of reimbursement for hospitals designated by the
Department of Public Health as a Perinatal Level II or II+
center by applying the same adjustor that is applied to
Perinatal and Obstetrical care cases for Perinatal Level
III centers, as of December 31, 2017.
(9) Beginning July 1, 2018, in addition to the
statewide-standardized amount, the Department shall apply
the same adjustor that is applied to trauma cases as of
December 31, 2017 to inpatient claims to treat patients
with burns, including, but not limited to, APR-DRGs 841,
842, 843, and 844.
(10) Beginning July 1, 2018, the
statewide-standardized amount for inpatient general acute
care services shall be uniformly increased so that base
claims projected reimbursement is increased by an amount

equal to the funds allocated in paragraph (1) of
subsection (b) of Section 5A-12.6, less the amount
allocated under paragraphs (8) and (9) of this subsection
and paragraphs (3) and (4) of subsection (b) multiplied by
40%.
(11) Beginning July 1, 2018, the reimbursement for
inpatient rehabilitation services shall be increased by
the addition of a $96 per day add-on.
(b) Outpatient hospital services. Effective for dates of
service on and after July 1, 2014, reimbursement for
outpatient services shall utilize the Enhanced Ambulatory
Procedure Grouping (EAPG) software, version 3.7 distributed by
3MTM Health Information System.
(1) The Department shall establish Medicaid weighting
factors to be used in the reimbursement system established
under this subsection. The initial weighting factors shall
be the weighting factors as published by 3M Health
Information System, associated with Version 3.7.
(2) The Department shall establish service specific
statewide-standardized amounts to be used in the
reimbursement system.
(A) The initial statewide standardized amounts,
with the labor portion adjusted by the Calendar Year
2013 Medicare Outpatient Prospective Payment System
wage index with reclassifications, shall be published
by the Department on its website no later than 10

calendar days prior to their effective date.
(B) The Department shall establish adjustments to
the statewide-standardized amounts for each Critical
Access Hospital, as designated by the Department of
Public Health in accordance with 42 CFR 485, Subpart
F. For outpatient services provided on or before June
30, 2018, the EAPG standardized amounts are determined
separately for each critical access hospital such that
simulated EAPG payments using outpatient base period
paid claim data plus payments under Section 5A-12.4 of
this Code net of the associated tax costs are equal to
the estimated costs of outpatient base period claims
data with a rate year cost inflation factor applied.
(3) In addition to the statewide-standardized amounts,
the Department shall develop adjusters to adjust the rate
of reimbursement for critical Medicaid hospital outpatient
providers or services, including outpatient high volume or
safety-net hospitals. Beginning July 1, 2018, the
outpatient high volume adjustor shall be increased to
increase annual expenditures associated with this adjustor
by $79,200,000, based on the State Fiscal Year 2015 base
year data and this adjustor shall apply to public
hospitals, except for large public hospitals, as defined
under 89 Ill. Adm. Code 148.25(a).
(4) Beginning July 1, 2018, in addition to the
statewide standardized amounts, the Department shall make

an add-on payment for outpatient expensive devices and
drugs. This add-on payment shall at least apply to claim
lines that: (i) are assigned with one of the following
EAPGs: 490, 1001 to 1020, and coded with one of the
following revenue codes: 0274 to 0276, 0278; or (ii) are
assigned with one of the following EAPGs: 430 to 441, 443,
444, 460 to 465, 495, 496, 1090. The add-on payment shall
be calculated as follows: the claim line's covered charges
multiplied by the hospital's total acute cost to charge
ratio, less the claim line's EAPG payment plus $1,000,
multiplied by 0.8.
(5) Beginning July 1, 2018, the statewide-standardized
amounts for outpatient services shall be increased by a
uniform percentage so that base claims projected
reimbursement is increased by an amount equal to no less
than the funds allocated in paragraph (1) of subsection
(b) of Section 5A-12.6, less the amount allocated under
paragraphs (8) and (9) of subsection (a) and paragraphs
(3) and (4) of this subsection multiplied by 46%.
(6) Effective for dates of service on or after July 1,
2018, the Department shall establish adjustments to the
statewide-standardized amounts for each Critical Access
Hospital, as designated by the Department of Public Health
in accordance with 42 CFR 485, Subpart F, such that each
Critical Access Hospital's standardized amount for
outpatient services shall be increased by the applicable

uniform percentage determined pursuant to paragraph (5) of
this subsection. It is the intent of the General Assembly
that the adjustments required under this paragraph (6) by
Public Act 100-1181 shall be applied retroactively to
claims for dates of service provided on or after July 1,
2018.
(7) Effective for dates of service on or after March
8, 2019 (the effective date of Public Act 100-1181), the
Department shall recalculate and implement an updated
statewide-standardized amount for outpatient services
provided by hospitals that are not Critical Access
Hospitals to reflect the applicable uniform percentage
determined pursuant to paragraph (5).
(1) Any recalculation to the
statewide-standardized amounts for outpatient services
provided by hospitals that are not Critical Access
Hospitals shall be the amount necessary to achieve the
increase in the statewide-standardized amounts for
outpatient services increased by a uniform percentage,
so that base claims projected reimbursement is
increased by an amount equal to no less than the funds
allocated in paragraph (1) of subsection (b) of
Section 5A-12.6, less the amount allocated under
paragraphs (8) and (9) of subsection (a) and
paragraphs (3) and (4) of this subsection, for all
hospitals that are not Critical Access Hospitals,

multiplied by 46%.
(2) It is the intent of the General Assembly that
the recalculations required under this paragraph (7)
by Public Act 100-1181 shall be applied prospectively
to claims for dates of service provided on or after
March 8, 2019 (the effective date of Public Act
100-1181) and that no recoupment or repayment by the
Department or an MCO of payments attributable to
recalculation under this paragraph (7), issued to the
hospital for dates of service on or after July 1, 2018
and before March 8, 2019 (the effective date of Public
Act 100-1181), shall be permitted.
(8) The Department shall ensure that all necessary
adjustments to the managed care organization capitation
base rates necessitated by the adjustments under
subparagraph (6) or (7) of this subsection are completed
and applied retroactively in accordance with Section
5-30.8 of this Code within 90 days of March 8, 2019 (the
effective date of Public Act 100-1181).
(9) Within 60 days after federal approval of the
change made to the assessment in Section 5A-2 by this
amendatory Act of the 101st General Assembly, the
Department shall incorporate into the EAPG system for
outpatient services those services performed by hospitals
currently billed through the Non-Institutional Provider
billing system.

(c) In consultation with the hospital community, the
Department is authorized to replace 89 Ill. Admin. Code
152.150 as published in 38 Ill. Reg. 4980 through 4986 within
12 months of June 16, 2014 (the effective date of Public Act
98-651). If the Department does not replace these rules within
12 months of June 16, 2014 (the effective date of Public Act
98-651), the rules in effect for 152.150 as published in 38
Ill. Reg. 4980 through 4986 shall remain in effect until
modified by rule by the Department. Nothing in this subsection
shall be construed to mandate that the Department file a
replacement rule.
(d) Transition period. There shall be a transition period
to the reimbursement systems authorized under this Section
that shall begin on the effective date of these systems and
continue until June 30, 2018, unless extended by rule by the
Department. To help provide an orderly and predictable
transition to the new reimbursement systems and to preserve
and enhance access to the hospital services during this
transition, the Department shall allocate a transitional
hospital access pool of at least $290,000,000 annually so that
transitional hospital access payments are made to hospitals.
(1) After the transition period, the Department may
begin incorporating the transitional hospital access pool
into the base rate structure; however, the transitional
hospital access payments in effect on June 30, 2018 shall
continue to be paid, if continued under Section 5A-16.

(2) After the transition period, if the Department
reduces payments from the transitional hospital access
pool, it shall increase base rates, develop new adjustors,
adjust current adjustors, develop new hospital access
payments based on updated information, or any combination
thereof by an amount equal to the decreases proposed in
the transitional hospital access pool payments, ensuring
that the entire transitional hospital access pool amount
shall continue to be used for hospital payments.
(d-5) Hospital and health care transformation program. The
Department shall develop a hospital and health care
transformation program to provide financial assistance to
hospitals in transforming their services and care models to
better align with the needs of the communities they serve. The
payments authorized in this Section shall be subject to
approval by the federal government.
(1) Phase 1. In State fiscal years 2019 through 2020,
the Department shall allocate funds from the transitional
access hospital pool to create a hospital transformation
pool of at least $262,906,870 annually and make hospital
transformation payments to hospitals. Subject to Section
5A-16, in State fiscal years 2019 and 2020, an Illinois
hospital that received either a transitional hospital
access payment under subsection (d) or a supplemental
payment under subsection (f) of this Section in State
fiscal year 2018, shall receive a hospital transformation

payment as follows:
(A) If the hospital's Rate Year 2017 Medicaid
inpatient utilization rate is equal to or greater than
45%, the hospital transformation payment shall be
equal to 100% of the sum of its transitional hospital
access payment authorized under subsection (d) and any
supplemental payment authorized under subsection (f).
(B) If the hospital's Rate Year 2017 Medicaid
inpatient utilization rate is equal to or greater than
25% but less than 45%, the hospital transformation
payment shall be equal to 75% of the sum of its
transitional hospital access payment authorized under
subsection (d) and any supplemental payment authorized
under subsection (f).
(C) If the hospital's Rate Year 2017 Medicaid
inpatient utilization rate is less than 25%, the
hospital transformation payment shall be equal to 50%
of the sum of its transitional hospital access payment
authorized under subsection (d) and any supplemental
payment authorized under subsection (f).
(2) Phase 2.
(A) The funding amount from phase one shall be
incorporated into directed payment and pass-through
payment methodologies described in Section 5A-12.7.
(B) Because there are communities in Illinois that
experience significant health care disparities due to

systemic racism, as recently emphasized by the
COVID-19 pandemic, aggravated by social determinants
of health and a lack of sufficiently allocated
healthcare resources, particularly community-based
services, preventive care, obstetric care, chronic
disease management, and specialty care, the Department
shall establish a health care transformation program
that shall be supported by the transformation funding
pool. It is the intention of the General Assembly that
innovative partnerships funded by the pool must be
designed to establish or improve integrated health
care delivery systems that will provide significant
access to the Medicaid and uninsured populations in
their communities, as well as improve health care
equity. It is also the intention of the General
Assembly that partnerships recognize and address the
disparities revealed by the COVID-19 pandemic, as well
as the need for post-COVID care. During State fiscal
years 2021 through 2027, the hospital and health care
transformation program shall be supported by an annual
transformation funding pool of up to $150,000,000,
pending federal matching funds, to be allocated during
the specified fiscal years for the purpose of
facilitating hospital and health care transformation.
No disbursement of moneys for transformation projects
from the transformation funding pool described under

this Section shall be considered an award, a grant, or
an expenditure of grant funds. Funding agreements made
in accordance with the transformation program shall be
considered purchases of care under the Illinois
Procurement Code, and funds shall be expended by the
Department in a manner that maximizes federal funding
to expend the entire allocated amount.
The Department shall convene, within 30 days after
the effective date of this amendatory Act of the 101st
General Assembly, a workgroup that includes subject
matter experts on healthcare disparities and
stakeholders from distressed communities, which could
be a subcommittee of the Medicaid Advisory Committee,
to review and provide recommendations on how
Department policy, including health care
transformation, can improve health disparities and the
impact on communities disproportionately affected by
COVID-19. The workgroup shall consider and make
recommendations on the following issues: a community
safety-net designation of certain hospitals, racial
equity, and a regional partnership to bring additional
specialty services to communities.
(C) As provided in paragraph (9) of Section 3 of
the Illinois Health Facilities Planning Act, any
hospital participating in the transformation program
may be excluded from the requirements of the Illinois

Health Facilities Planning Act for those projects
related to the hospital's transformation. To be
eligible, the hospital must submit to the Health
Facilities and Services Review Board approval from the
Department that the project is a part of the
hospital's transformation.
(D) As provided in subsection (a-20) of Section
32.5 of the Emergency Medical Services (EMS) Systems
Act, a hospital that received hospital transformation
payments under this Section may convert to a
freestanding emergency center. To be eligible for such
a conversion, the hospital must submit to the
Department of Public Health approval from the
Department that the project is a part of the
hospital's transformation.
(E) Criteria for proposals. To be eligible for
funding under this Section, a transformation proposal
shall meet all of the following criteria:
(i) the proposal shall be designed based on
community needs assessment completed by either a
University partner or other qualified entity with
significant community input;
(ii) the proposal shall be a collaboration
among providers across the care and community
spectrum, including preventative care, primary
care specialty care, hospital services, mental

health and substance abuse services, as well as
community-based entities that address the social
determinants of health;
(iii) the proposal shall be specifically
designed to improve healthcare outcomes and reduce
healthcare disparities, and improve the
coordination, effectiveness, and efficiency of
care delivery;
(iv) the proposal shall have specific
measurable metrics related to disparities that
will be tracked by the Department and made public
by the Department;
(v) the proposal shall include a commitment to
include Business Enterprise Program certified
vendors or other entities controlled and managed
by minorities or women; and
(vi) the proposal shall specifically increase
access to primary, preventive, or specialty care.
(F) Entities eligible to be funded.
(i) Proposals for funding should come from
collaborations operating in one of the most
distressed communities in Illinois as determined
by the U.S. Centers for Disease Control and
Prevention's Social Vulnerability Index for
Illinois and areas disproportionately impacted by
COVID-19 or from rural areas of Illinois.

(ii) The Department shall prioritize
partnerships from distressed communities, which
include Business Enterprise Program certified
vendors or other entities controlled and managed
by minorities or women and also include one or
more of the following: safety-net hospitals,
critical access hospitals, the campuses of
hospitals that have closed since January 1, 2018,
or other healthcare providers designed to address
specific healthcare disparities, including the
impact of COVID-19 on individuals and the
community and the need for post-COVID care. All
funded proposals must include specific measurable
goals and metrics related to improved outcomes and
reduced disparities which shall be tracked by the
Department.
(iii) The Department should target the funding
in the following ways: $30,000,000 of
transformation funds to projects that are a
collaboration between a safety-net hospital,
particularly community safety-net hospitals, and
other providers and designed to address specific
healthcare disparities, $20,000,000 of
transformation funds to collaborations between
safety-net hospitals and a larger hospital partner
that increases specialty care in distressed

communities, $30,000,000 of transformation funds
to projects that are a collaboration between
hospitals and other providers in distressed areas
of the State designed to address specific
healthcare disparities, $15,000,000 to
collaborations between critical access hospitals
and other providers designed to address specific
healthcare disparities, and $15,000,000 to
cross-provider collaborations designed to address
specific healthcare disparities, and $5,000,000 to
collaborations that focus on workforce
development.
(iv) The Department may allocate up to
$5,000,000 for planning, racial equity analysis,
or consulting resources for the Department or
entities without the resources to develop a plan
to meet the criteria of this Section. Any contract
for consulting services issued by the Department
under this subparagraph shall comply with the
provisions of Section 5-45 of the State Officials
and Employees Ethics Act. Based on availability of
federal funding, the Department may directly
procure consulting services or provide funding to
the collaboration. The provision of resources
under this subparagraph is not a guarantee that a
project will be approved.

(v) The Department shall take steps to ensure
that safety-net hospitals operating in
under-resourced communities receive priority
access to hospital and healthcare transformation
funds, including consulting funds, as provided
under this Section.
(G) Process for submitting and approving projects
for distressed communities. The Department shall issue
a template for application. The Department shall post
any proposal received on the Department's website for
at least 2 weeks for public comment, and any such
public comment shall also be considered in the review
process. Applicants may request that proprietary
financial information be redacted from publicly posted
proposals and the Department in its discretion may
agree. Proposals for each distressed community must
include all of the following:
(i) A detailed description of how the project
intends to affect the goals outlined in this
subsection, describing new interventions, new
technology, new structures, and other changes to
the healthcare delivery system planned.
(ii) A detailed description of the racial and
ethnic makeup of the entities' board and
leadership positions and the salaries of the
executive staff of entities in the partnership

that is seeking to obtain funding under this
Section.
(iii) A complete budget, including an overall
timeline and a detailed pathway to sustainability
within a 5-year period, specifying other sources
of funding, such as in-kind, cost-sharing, or
private donations, particularly for capital needs.
There is an expectation that parties to the
transformation project dedicate resources to the
extent they are able and that these expectations
are delineated separately for each entity in the
proposal.
(iv) A description of any new entities formed
or other legal relationships between collaborating
entities and how funds will be allocated among
participants.
(v) A timeline showing the evolution of sites
and specific services of the project over a 5-year
period, including services available to the
community by site.
(vi) Clear milestones indicating progress
toward the proposed goals of the proposal as
checkpoints along the way to continue receiving
funding. The Department is authorized to refine
these milestones in agreements, and is authorized
to impose reasonable penalties, including

repayment of funds, for substantial lack of
progress.
(vii) A clear statement of the level of
commitment the project will include for minorities
and women in contracting opportunities, including
as equity partners where applicable, or as
subcontractors and suppliers in all phases of the
project.
(viii) If the community study utilized is not
the study commissioned and published by the
Department, the applicant must define the
methodology used, including documentation of clear
community participation.
(ix) A description of the process used in
collaborating with all levels of government in the
community served in the development of the
project, including, but not limited to,
legislators and officials of other units of local
government.
(x) Documentation of a community input process
in the community served, including links to
proposal materials on public websites.
(xi) Verifiable project milestones and quality
metrics that will be impacted by transformation.
These project milestones and quality metrics must
be identified with improvement targets that must

be met.
(xii) Data on the number of existing employees
by various job categories and wage levels by the
zip code of the employees' residence and
benchmarks for the continued maintenance and
improvement of these levels. The proposal must
also describe any retraining or other workforce
development planned for the new project.
(xiii) If a new entity is created by the
project, a description of how the board will be
reflective of the community served by the
proposal.
(xiv) An explanation of how the proposal will
address the existing disparities that exacerbated
the impact of COVID-19 and the need for post-COVID
care in the community, if applicable.
(xv) An explanation of how the proposal is
designed to increase access to care, including
specialty care based upon the community's needs.
(H) The Department shall evaluate proposals for
compliance with the criteria listed under subparagraph
(G). Proposals meeting all of the criteria may be
eligible for funding with the areas of focus
prioritized as described in item (ii) of subparagraph
(F). Based on the funds available, the Department may
negotiate funding agreements with approved applicants

to maximize federal funding. Nothing in this
subsection requires that an approved project be funded
to the level requested. Agreements shall specify the
amount of funding anticipated annually, the
methodology of payments, the limit on the number of
years such funding may be provided, and the milestones
and quality metrics that must be met by the projects in
order to continue to receive funding during each year
of the program. Agreements shall specify the terms and
conditions under which a health care facility that
receives funds under a purchase of care agreement and
closes in violation of the terms of the agreement must
pay an early closure fee no greater than 50% of the
funds it received under the agreement, prior to the
Health Facilities and Services Review Board
considering an application for closure of the
facility. Any project that is funded shall be required
to provide quarterly written progress reports, in a
form prescribed by the Department, and at a minimum
shall include the progress made in achieving any
milestones or metrics or Business Enterprise Program
commitments in its plan. The Department may reduce or
end payments, as set forth in transformation plans, if
milestones or metrics or Business Enterprise Program
commitments are not achieved. The Department shall
seek to make payments from the transformation fund in

a manner that is eligible for federal matching funds.
In reviewing the proposals, the Department shall
take into account the needs of the community, data
from the study commissioned by the Department from the
University of Illinois-Chicago if applicable, feedback
from public comment on the Department's website, as
well as how the proposal meets the criteria listed
under subparagraph (G). Alignment with the
Department's overall strategic initiatives shall be an
important factor. To the extent that fiscal year
funding is not adequate to fund all eligible projects
that apply, the Department shall prioritize
applications that most comprehensively and effectively
address the criteria listed under subparagraph (G).
(3) (Blank).
(4) Hospital Transformation Review Committee. There is
created the Hospital Transformation Review Committee. The
Committee shall consist of 14 members. No later than 30
days after March 12, 2018 (the effective date of Public
Act 100-581), the 4 legislative leaders shall each appoint
3 members; the Governor shall appoint the Director of
Healthcare and Family Services, or his or her designee, as
a member; and the Director of Healthcare and Family
Services shall appoint one member. Any vacancy shall be
filled by the applicable appointing authority within 15
calendar days. The members of the Committee shall select a

Chair and a Vice-Chair from among its members, provided
that the Chair and Vice-Chair cannot be appointed by the
same appointing authority and must be from different
political parties. The Chair shall have the authority to
establish a meeting schedule and convene meetings of the
Committee, and the Vice-Chair shall have the authority to
convene meetings in the absence of the Chair. The
Committee may establish its own rules with respect to
meeting schedule, notice of meetings, and the disclosure
of documents; however, the Committee shall not have the
power to subpoena individuals or documents and any rules
must be approved by 9 of the 14 members. The Committee
shall perform the functions described in this Section and
advise and consult with the Director in the administration
of this Section. In addition to reviewing and approving
the policies, procedures, and rules for the hospital and
health care transformation program, the Committee shall
consider and make recommendations related to qualifying
criteria and payment methodologies related to safety-net
hospitals and children's hospitals. Members of the
Committee appointed by the legislative leaders shall be
subject to the jurisdiction of the Legislative Ethics
Commission, not the Executive Ethics Commission, and all
requests under the Freedom of Information Act shall be
directed to the applicable Freedom of Information officer
for the General Assembly. The Department shall provide

operational support to the Committee as necessary. The
Committee is dissolved on April 1, 2019.
(e) Beginning 36 months after initial implementation, the
Department shall update the reimbursement components in
subsections (a) and (b), including standardized amounts and
weighting factors, and at least once every 4 years triennially
and no more frequently than annually thereafter. The
Department shall publish these updates on its website no later
than 30 calendar days prior to their effective date.
(f) Continuation of supplemental payments. Any
supplemental payments authorized under Illinois Administrative
Code 148 effective January 1, 2014 and that continue during
the period of July 1, 2014 through December 31, 2014 shall
remain in effect as long as the assessment imposed by Section
5A-2 that is in effect on December 31, 2017 remains in effect.
(g) Notwithstanding subsections (a) through (f) of this
Section and notwithstanding the changes authorized under
Section 5-5b.1, any updates to the system shall not result in
any diminishment of the overall effective rates of
reimbursement as of the implementation date of the new system
(July 1, 2014). These updates shall not preclude variations in
any individual component of the system or hospital rate
variations. Nothing in this Section shall prohibit the
Department from increasing the rates of reimbursement or
developing payments to ensure access to hospital services.
Nothing in this Section shall be construed to guarantee a

minimum amount of spending in the aggregate or per hospital as
spending may be impacted by factors, including, but not
limited to, the number of individuals in the medical
assistance program and the severity of illness of the
individuals.
(h) The Department shall have the authority to modify by
rulemaking any changes to the rates or methodologies in this
Section as required by the federal government to obtain
federal financial participation for expenditures made under
this Section.
(i) Except for subsections (g) and (h) of this Section,
the Department shall, pursuant to subsection (c) of Section
5-40 of the Illinois Administrative Procedure Act, provide for
presentation at the June 2014 hearing of the Joint Committee
on Administrative Rules (JCAR) additional written notice to
JCAR of the following rules in order to commence the second
notice period for the following rules: rules published in the
Illinois Register, rule dated February 21, 2014 at 38 Ill.
Reg. 4559 (Medical Payment), 4628 (Specialized Health Care
Delivery Systems), 4640 (Hospital Services), 4932 (Diagnostic
Related Grouping (DRG) Prospective Payment System (PPS)), and
4977 (Hospital Reimbursement Changes), and published in the
Illinois Register dated March 21, 2014 at 38 Ill. Reg. 6499
(Specialized Health Care Delivery Systems) and 6505 (Hospital
Services).
(j) Out-of-state hospitals. Beginning July 1, 2018, for

purposes of determining for State fiscal years 2019 and 2020
and subsequent fiscal years the hospitals eligible for the
payments authorized under subsections (a) and (b) of this
Section, the Department shall include out-of-state hospitals
that are designated a Level I pediatric trauma center or a
Level I trauma center by the Department of Public Health as of
December 1, 2017.
(k) The Department shall notify each hospital and managed
care organization, in writing, of the impact of the updates
under this Section at least 30 calendar days prior to their
effective date.
(Source: P.A. 100-581, eff. 3-12-18; 100-1181, eff. 3-8-19;
101-81, eff. 7-12-19; 101-650, eff. 7-7-20; 101-655, eff.
3-12-21.)
Section 99. Effective date. This Act takes effect upon
becoming law.