Governor Ned Lamont signed Public Act No. 26-68 on May 26, 2026, triggering a sweeping overhaul of Connecticut’s health care provider tax structure.
The legislation, described as a budget implementer, revises how the state taxes and funds certain health care providers across multiple categories.
Public Act No. 26-76, signed the following day, made conforming and clarifying revisions to the first act, with both pieces of legislation acting together as a unified framework.
The acts set a 4% tax rate for inpatient hospital services covering fiscal years 2027 through 2031, after which the rate drops to 3.5% beginning in FY 2032.
A five-year schedule also determines which federal fiscal year is used to calculate the tax base for both inpatient and outpatient hospital services going forward.
For outpatient hospital services, the legislation does not fix a statutory rate but instead establishes a statewide revenue target starting at $974 million in FY 2027, rising to approximately $1.073 billion by FY 2031.
Beginning in FY 2027, hospital dissolutions and cessations of operations will no longer trigger recalculations that shift a departing hospital’s tax burden onto remaining taxpaying hospitals.
Children’s general hospitals are required to begin paying the hospital tax from July 1, 2026, even while a federal approval process with the Centers for Medicare and Medicaid Services remains pending.
If CMS ultimately denies approval to remove the children’s general hospital tax exemption, those hospitals will be entitled to a refund under the terms of the act.
The legislation creates a dedicated hospital supplemental payment account, into which hospital tax revenue received for calendar quarters beginning on or after July 1, 2026, must be deposited.
The Department of Social Services must use the account to make Medicaid supplemental payments to hospitals, hospital-affiliated medical groups, and faculty practice plans.
A backstop mechanism requires the Office of Policy and Management to consult with the Department of Revenue Services and DSS if the account is projected to fall short of required payments.
If collection of delinquent taxes cannot close any funding gap, OPM must certify a shortfall and request a General Fund transfer via the Finance Advisory Committee.
For FY 2027, hospitals subject to the provider tax were required to submit revenue information to the Department of Revenue Services within 30 days of the act’s passage.
Hospitals that fail to comply with additional information requests from DRS face a penalty of $1,000 for each day the non-compliance continues.
Nursing homes and intermediate care facilities for individuals with intellectual disabilities will continue paying quarterly user fees rather than moving to a new 6% revenue-based tax.
The applicable quarterly user fee is $16.13 for municipally owned nursing homes and those with more than 230 beds, $21.02 for all other nursing homes, and $27.76 for intermediate care facilities.
Providers affected by the legislation are advised to assess how the revised tax framework, supplemental payment account, and reporting obligations affect their finance, reimbursement, and compliance strategies.