HB5370 amends Section 5-5.02 of the Illinois Public Aid Code to change how the Medicaid inpatient utilization rate (MUR) is calculated for hospital disproportionate‑share and related inpatient adjustment payments. Beginning October 1, 2026 (rate year 2027), the bill adds a new subsection that directs the Department to exclude, from both the numerator and denominator of the MUR used to determine eligibility and payment levels under paragraph (c), all inpatient days reimbursed by the Department of Human Services (DHS) for services provided under Section 104‑17 of the Code of Criminal Procedure of 1963 as contracted by the Department of Healthcare and Family Services (HFS).
The Act takes effect on becoming law.
The change targets a specific class of inpatient days — those paid by DHS for 104‑17 mental‑health services contracted through HFS — and removes them from the MUR calculation hospitals use to qualify for per‑day adjustment payments and supplemental payments. That technical change will shift which hospitals meet the thresholds spelled out in subsection (b) and therefore can materially alter Medicaid adjustment payment distributions and state Medicaid spending dynamics.
At a Glance
What It Does
The bill inserts subsection (c‑1) into 305 ILCS 5/5‑5.02 directing the Department to exclude all inpatient days reimbursed by DHS for services under Code of Criminal Procedure Section 104‑17 (as contracted by HFS) from both the numerator and denominator of the Medicaid inpatient utilization rate used to determine inpatient adjustment payments. The exclusion applies for rate year 2027 and thereafter, effective October 1, 2026.
Who It Affects
Hospitals whose inpatient caseload includes DHS‑reimbursed 104‑17 mental‑health days (including acute psychiatric units and hospitals with state forensic contracts) will see their Medicaid inpatient utilization rate recalculated. The Department of Healthcare and Family Services, the Department of Human Services, hospital finance and reporting units, and state Medicaid budget officials must adapt data, reporting, and payment processes.
Why It Matters
The MUR is the gatekeeper for per‑day adjustment payments and supplemental inpatient payments; changing what counts in that fraction can move hospitals above or below eligibility thresholds and change per‑day payment tiers. That re‑allocates Medicaid funding across hospitals, affects state Medicaid outlays, and creates operational and federal‑compliance tasks for agencies and providers.
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What This Bill Actually Does
HB5370 makes a surgical change to how Illinois calculates the Medicaid inpatient utilization rate that underlies certain inpatient adjustment payments to hospitals. The bill creates a new paragraph (c‑1) in Section 5‑5.02 instructing the Department to remove from the MUR calculation any inpatient days that the Department of Human Services reimburses for services provided under Section 104‑17 of the Code of Criminal Procedure of 1963 when those services are contracted by the Department of Healthcare and Family Services.
Concretely, those days must be removed from both the numerator (Medicaid inpatient days) and the denominator (total inpatient days) that compose the MUR used to determine eligibility and payment levels under paragraph (c).
Timing and scope are tight: the rule applies beginning October 1, 2026 for rate year 2027 and thereafter. The bill does not alter the formulas for per‑day adjustment payments, the dollar tiers in subsection (c), or the supplemental $60 per‑day payments in subsection (d); it only changes the underlying utilization metric used to decide which hospitals qualify and which per‑day tier applies.
The statutory text explicitly links the modification to the definition in subsection (h)(1) — the statutory definition of "Medicaid inpatient utilization rate" — for determinations under paragraph (c).Operationally, the change requires agencies and hospitals to identify and segregate DHS‑reimbursed 104‑17 days in hospital reporting and claims or encounter records so those days can be stripped out of the MUR numerator and denominator. That will alter hospitals' reported MURs in varying directions depending on how many DHS‑paid 104‑17 days they currently record, producing winners and losers among hospitals with forensic or state‑contracted psychiatric volumes.
The Department will need to implement revised reporting, and federal Title XIX implications — including whether the revised calculation requires CMS approval or affects federal matching or DSH limits — will need to be assessed during implementation.
The Five Things You Need to Know
The bill adds a new subsection (c‑1) to 305 ILCS 5/5‑5.02 that instructs HFS to exclude from the Medicaid inpatient utilization rate all inpatient days reimbursed by DHS for services provided under Code of Criminal Procedure Section 104‑17 when contracted by HFS.
The exclusion applies to both the numerator and denominator of the MUR used to determine eligibility and per‑day inpatient adjustment payments under subsection (c), and to calculations that feed supplemental payments under subsection (d).
Effective date for the exclusion is October 1, 2026, and it applies for rate year 2027 and thereafter; the Act itself takes effect upon becoming law.
The statute does not change the dollar tiers, per‑day amounts, or the eligibility thresholds in subsection (b) — it only changes the underlying utilization calculation that triggers those tiers and thresholds.
Implementation will require hospitals, HFS, and DHS to identify and segregate DHS‑reimbursed 104‑17 inpatient days in reporting systems so those days can be removed from MUR calculations used for adjustment payments.
Section-by-Section Breakdown
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Exclude DHS‑reimbursed 104‑17 days from MUR calculations
The bill inserts a standalone subsection (c‑1) into Section 5‑5.02. It explicitly directs that, beginning October 1, 2026 (rate year 2027), the Medicaid inpatient utilization rate used to determine eligibility for inpatient adjustment payments under paragraph (c) must exclude all days reimbursed by DHS for services provided under Code of Criminal Procedure Section 104‑17 as contracted by HFS. This is a statistical exclusion: the specified days are removed from both the numerator and denominator used in the calculation rather than reclassified as Medicaid days or placed into a new category.
Targets the statutory definition of Medicaid inpatient utilization rate
The change operates by modifying how the existing statutory definition in subsection (h)(1) is applied for inpatient‑adjustment determinations under paragraph (c). It does not rewrite the definition language; instead it creates an exception for calculations tied to adjustment payments. Practically, the Department will calculate two things: the MUR for payment determinations (with 104‑17 DHS days excluded) and the broader statutory MUR definition remains intact for other purposes unless the Department issues rules to align definitions elsewhere.
Applies only to rate year 2027 and thereafter, immediate effect of the Act
Although the bill takes effect on becoming law, the substantive exclusion is slated to begin October 1, 2026 for rate year 2027 and after. That timing gives agencies a defined start date for changing reporting and payment computations but creates a short implementation window for HFS and DHS to coordinate data flows and reconcile prior reporting periods if necessary.
Per‑day payment tiers and supplemental payments remain as written
HB5370 does not alter the dollar figures or tiered formulas in subsection (c) that set per‑day adjustment payments, nor the supplemental $60/day payment in subsection (d). The bill only changes the MUR input. That means any change in a hospital's adjustment payment will come from how the recalculated MUR moves the hospital across eligibility and tier thresholds, not from altered per‑day rates.
Data segregation, reporting, and potential federal coordination
Because the exclusion is specific to DHS‑reimbursed days for 104‑17 services contracted by HFS, HFS and DHS must establish a reliable method to flag those days in hospital data (claims, encounter records, or supplemental reporting). Hospitals will likely need to adjust internal charge‑and‑utilization reporting. The Departments will also need to consider whether CMS approval or federal‑plan amendments are necessary to ensure the change conforms with Title XIX reporting and DSH accounting rules.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Hospitals with significant DHS‑reimbursed 104‑17 volumes: Excluding DHS‑paid forensic/104‑17 days from the MUR will often raise their reported Medicaid inpatient utilization rate (because non‑Medicaid DHS days previously inflated denominators), making them more likely to qualify for adjustment payments or higher per‑day tiers.
- Psychiatric units and hospitals holding state contracts for forensic care: Facilities that serve a large number of patients under DHS contracts for 104‑17 services will see the largest proportional change in their MURs and therefore their eligibility for supplemental and per‑day adjustments.
- Hospital finance and compliance teams looking to capture payments: Hospitals that had been indirectly penalized in the MUR calculation by inclusion of DHS‑paid days stand to recover additional revenue if their recalculated MURs cross statutory thresholds.
Who Bears the Cost
- Department of Healthcare and Family Services (HFS) and Department of Human Services (DHS): HFS’s Medicaid payment outlays may rise if more hospitals qualify for higher adjustment payments; both agencies will face administrative costs to identify and segregate 104‑17 days and to coordinate data sharing.
- State Medicaid budget/taxpayers: Any increase in eligibility or payment levels driven by calculation changes will increase state Medicaid expenditures unless offset elsewhere in the budget.
- Hospitals and vendors (billing/IT) with limited reporting systems: Facilities that must change legacy billing, utilization tracking, or reporting systems to flag DHS‑reimbursed 104‑17 days will face implementation costs; smaller hospitals or rural facilities may encounter outsized compliance burdens.
- Federal oversight/Title XIX accounting: If federal rules require changes to the State Plan or different DSH accounting, the State may incur delay or require federal approvals that constrain immediate fiscal impacts.
Key Issues
The Core Tension
The central tension is between measurement accuracy and budgetary and administrative consequences: excluding DHS‑reimbursed 104‑17 days produces a cleaner Medicaid utilization metric that better reflects true Medicaid patient mix, but it shifts Medicaid payment flows, increases implementation complexity for agencies and hospitals, and can raise state Medicaid costs without an obvious offset.
The bill fixes a narrow statistical distortion by removing a distinct class of inpatient days from the MUR calculation, but it shifts the problem rather than eliminating trade‑offs. First, operationalizing the exclusion requires explicit, auditable flags in hospital data to mark DHS‑reimbursed 104‑17 days.
Hospitals and state agencies will need to agree on which claims/encounters qualify, how to treat mixed‑payer days, and whether historical data needs correction for transitional reporting. Those implementation choices matter: small differences in classification will change which hospitals cross eligibility thresholds.
Second, the fiscal impact is distributional and not neutral. Removing DHS‑paid days will typically raise MURs for hospitals concentrated in forensic care and reduce the denominator distortions that previously masked Medicaid intensity.
That creates winners (those hospitals) and losers (other providers whose relative share of adjustment payments shrinks). The statute does not supply offsetting savings or new revenue sources, so HFS must either absorb higher payments, reallocate existing funds, or adjust other payment methodologies.
Finally, federal Title XIX implications — including whether the modified calculation affects DSH caps, federal reimbursement rates, or requires State Plan amendments — are unresolved in the text and could limit or delay the practical effect of the change.
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