The Tennessee Hospital Association’s plan to offset proposed TennCare cuts took a step forward yesterday when details of the proposal were sent to state lawmakers.

Rep. Joe Armstrong and Sen. Doug Overbey on Wednesday submitted legislation, as an amendment to HB 3310/SB 3528, creating the 3.5 percent “coverage fee,” according to THA. If approved, the fee on hospitals’ net patient revenues would generate nearly $230 million for the state’s Medicaid program, funds that would be used to draw down federal matching dollars for a total of $659 million.

Without this action, hospital leaders have argued, proposed TennCare cuts could cripple hospitals’ finances, forcing some to slash services or shutter completely.

Saint Thomas Health Affiliates CEO Wes Littrell told NashvillePost.com last month that Saint Thomas’ four hospitals would take a collective $13 million hit through the TennCare reductions set to take effect July 1. Nashville General Hospital has predicted a $10.5 million negative impact.

In total, TennCare reductions this year and next, including the loss of federal matching funds, are estimated at $1.2 billion.

When originally approved by the THA’s board last month, the organization had estimated a $546 million negative impact to hospitals from TennCare cuts and pegged the tax at between 1 percent and 2 percent.

The coverage fee is designed as a temporary, one-year fix. It would be effective July 1 and paid by all licensed acute-care and psychiatric hospitals, excluding state and non-state-owned government facilities, critical access hospitals, freestanding rehab facilities and pediatric research hospitals.

After clearing the Tennessee General Assembly, the legislation must be approved by the Centers for Medicare and Medicaid Services before taking effect.