Governor Doug Ducey has signed legislation that will charge hospitals a new fee but bring them higher Medicaid payments in return.
It will assess hospitals about $350 million a year for services provided to outpatients.
Hospitals, physicians and other providers would in return get higher payments for caring for patients with Medicaid expected to total $1.1 billion.
The higher payments are expected to eliminate an estimated $1 billion in unreimbursed costs.
Ducey signed the bill Wednesday that overwhelmingly passed the Legislature before state lawmakers adjourned this week.