SECTION 1:  Section 13A of Chapter 118E of the Massachusetts General Laws, as appearing in the 2004 Official Edition, is hereby amended by inserting after the third paragraph the following paragraph:

For any hospital fiscal year commencing on or after October 1, 2007, the Commonwealth shall establish a new rate methodology through the Division of Healthcare Finance and Policy and the Executive Office of Health and Human Services to cover the cost of care provided by any facility licensed by the Department of Public Health as a chronic disease hospital providing services solely to children and adolescents, as follows: (1) The rate of reimbursement for any such facility shall be developed collaboratively through an agreement among the office of Medicaid, the Division of Healthcare Finance and Policy, and any such facility; (2) the reimbursement rate for any such facility shall incorporate the following components: (a) utilization of the reimbursement methodology used by the Division and the Executive Office of Health and Human Services to determine payments for Medicaid  disproportionate share pediatric hospitals in effect in 2007 utilizing the most recently filed 403 cost report with the division and the payments received from Medicaid eligible patients for the base period;  (b) a per diem rate for inpatient and a payment on account factor for outpatient shall be established which reimburses the full unrecovered cost, including capital; and (c) the rates shall be inflated over the base period by the applicable Medicare market basket inflation factors;  and (3) notwithstanding any other provision of law, in no event will the rates of payment be lower than the rates in effect for such facility in the prior fiscal year .