The U.S. government incentivizes states to expand Medicaid for low-income individuals, balanced by shared state costs. To fund their Medicaid share, 49 states and the District of Columbia use a hospital provider fee. In Ohio, it’s termed a franchise fee.

Finance News – Franchise Fee

Connect here for news and analysis prepared by OHA’s Health Economics & Policy team.

Franchise Fee News

Program Overview

Medicaid is funded through a combination of both federal and state funds. Ohio provides the state’s share of Medicaid funding through both state tax revenue and hospital fee revenue raised from the Hospital Franchise Fee Program.

For every $1 in Franchise Fee funds sent to Washington, D.C. the state receives $3 in federal matching funds. This creates a total of $4 Medicaid dollars for every $1 invested.

Franchise Fee Assessments

All Ohio hospitals pay the same Franchise Fee rate, regardless of the volume of Medicaid patients they treat.

Supplemental Payments to Hospitals

Since 2009, the Hospital Franchise Fee program has offered several payment methods to hospitals. Initially, it provided Upper Payment Limit, or UPL, payments, which declined due to the growth of Medicaid managed care and were eliminated in December 2019.

To compensate, OHA worked with the Ohio Department of Medicaid to create Cost Coverage Add-Ons, or CCAs, in January 2020 to match Medicare fee-for-service hospital reimbursement levels. During the COVID-19 pandemic, CCAs were supplemented by Hospital Additional Payments. Lastly, Medicaid Managed Care Incentive payments reward Ohio hospitals for increasing access and treatment for Medicaid beneficiaries in a managed care plan.