• Tennessee: Governor Signs Bill Changing Nursing Home Tax
  • May 21, 2014
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • On April 30, 2014, Tennessee Governor Bill Haslam signed H.B. 1783, revising the state’s tax on nursing homes. The new law, which will take effect on July 1, 2014, will change how the state taxes nursing homes by moving from a per-bed bases to a percentage of revenue basis. The bill initially passed the Tennessee State House of Representatives by a margin of 87-3 and subsequently received unanimous approval by the Senate.

    Previously, the state taxed licensed nursing homes at a rate of $2,225 per bed annually. Now, similar to Tennessee’s tax on hospitals, nursing homes will pay a tax of 4.5 percent of the “net patient service revenue.” The new law defines “net patient service revenue” as follows:

    Gross inpatient revenues from services provided to nursing home patients less reductions for gross inpatient revenue resulting from an inability to collect payment of charges.

    This definition excludes revenue from services that are unrelated to patient care such as revenues from vending machine sales and meal sales.

    Tennessee will place the revenue generated from the tax in a trust fund to be used for payments for certain TennCare services, the state’s Medicaid program. In addition, any funds received by Tennessee from the federal government pursuant to its matching program will also be placed into the trust fund to be used for payments for certain TennCare services. Generally, when a state provides Medicaid services, the federal government will match any state spending based on a state-specific rate. For Tennessee, the federal government matches almost 65 percent of any state funds Tennessee spends on TennCare. Based on the previous tax, the federal government was giving the state $1,446.25 per bed. It is unclear what the expected revenue will be as a result of the new tax basis.

    Supporters have expressed their enthusiasm at the hopes that revising the manner in which nursing homes are taxed will curb the decline of nursing home beds and operate as a “fair tax.” However, the Federal Centers for Medicare and Medicaid Services must still approve the matching of funds from the new tax. If it does not approve the state’s new method, then the previous $2,225 per-bed tax will remain in place.