Gov. Neil Abercrombie on Tuesday signed a bill into law that sets provider fees on large nursing homes, enabling the state to receive additional federal money to care for the elderly.

Large nursing homes will pay $11.5 million in provider fees that will generate a $21 million return. The extra money will be used to increase state reimbursement payments to large nursing homes that care for elderly and disabled patients in QUEST, the state’s health plan for the poor. The state will also receive a 12 percent share, or about $1.3 million, which it intends to use to lift a 3 percent cut in reimbursement payments to nursing homes that was made to help balance the state budget.

Provider fees have been adopted in most states to leverage federal Medicaid money. Health care providers agree to pay the fees with the expectation that more money will flow back from the federal government to help cover the costs of caring for the poor.

Abercrombie said the new law would help sustain the state’s health care system. But the governor has placed a nearly identical bill that would establish provider fees on private hospitals on his potential veto list. Advocates for private hospitals had fought the Abercrombie administration’s attempt to take a 12 percent share of the extra money for hospitals, and state lawmakers, siding with hospitals, put the state’s share at 7 percent.

Abercrombie said large nursing homes understood that the state needed a portion of the extra federal money. "As a result we’re going to have this signing today where everybody is winning because the public interest is being served by all sides," the governor said at a news conference at the state Capitol.

Asked why he would sign one provider fee bill into law and not the other, he said they were different circumstances: "You’ve got special interests and the public interest, and when they coincide, why, that’s a happy day."

Bob Ogawa, president of the Hawaii Long Term Care Association, which represents nursing homes, called the new law an example of partnership between the private sector, the Legislature and the Abercrombie administration in what can be a very contentious process. "The result is a program that will infuse millions of much-needed new dollars into the care of our kupuna and support the work of those who minister to their needs, and it doesn’t cost the taxpayers of Hawaii a dime," he said.

The new law will impose provider fees of up to 4 percent of net patient service revenue at large nursing homes. The fees will not apply to nursing homes with 28 or fewer beds, state nursing homes, or continuing care retirement communities.

George Greene, president and chief executive officer of the Healthcare Association of Hawaii, which represents hospitals and nursing homes, said the new law provides large nursing homes with a "real lifeline."

Greene said he hopes Abercrombie will sign the provider fee for hospitals or allow the bill to become law without his signature. "These are tough decisions that a governor has to make, and right now it’s in his hands," he said. "We’re hopeful that these funds will make their way to the hospitals that need them."

The Abercrombie administration, according to several sources, may be sending a message to Greene and other advocates for private hospitals, who had aggressively lobbied against a larger state share. The administration also announced in late May that the state’s public hospitals would get the bulk of the extra $10 million in federal money the state receives annually to help cover health care costs of the poor and uninsured. Private hospitals had been receiving the federal money for the past several years.

Greene and others have said a larger state share could have undermined support for provider fees among private hospitals. In addition, a few hospitals may have lost money under a formula with a bigger state share.

State Rep. Ryan Yamane (D, Waipahu-Mililani), chairman of the House Health Committee, urged the governor to let the bill become law. He said the bill, like the new law for nursing homes, only imposes the provider fees for one year. "It will give the private hospitals the opportunity to work it through — work actual numbers out — see what the return rates are," he said, adding that lawmakers could adjust the state share if the provider fees are extended.