1. The Chancellor of the University of Maine System, referred to in this section as "the chancellor," and any insurance company or 3rd-party administrator, referred to in this section as "the carrier," insuring or administering the University of Maine System health plan, referred to in this section as "the plan," shall jointly negotiate agreements with hospitals participating in the carrier's provider network to reduce the expense incurred by the plan in state fiscal year 2003-04 by the amount of $2,250,000 and in state fiscal year 2004-05 by the amount of $2,250,000. In undertaking such negotiations, the carrier is deemed at all times to be the agent of the University of Maine System. The chancellor and the carrier acting at the direction of the chancellor may offer or demand such terms and conditions as the chancellor considers to be in the best interest of the university to reduce the expense of the plan, including, but not limited to, offering or demanding reductions in standard hospital reimbursement rates, rebates and refunds and uniform terms relating to such reductions, rebates or refunds. The chancellor may not affect or seek to affect amounts paid to hospitals relating to any other customer of the carrier.

2. The Commissioner of Human Services shall implement appropriate normalizing adjustments, no less than annually, to the public revenue component and the annual periodic interim payments of each hospital under subsection 1, consistent with the requirements of Title XIX of the federal Social Security Act, to offset the impact of any plan-related revenue reduction under this section. If any payment made in accordance with this subsection is subsequently determined to be subject to recoupment, the State shall reimburse the hospital for all such recoupment costs paid by the hospital.

3. Any carrier subject to this section is immune from any claim of or liability to any hospital or other health care provider for any action taken in furtherance of the authority and directives as set forth in this section. A reimbursement rate, discount or rebate resulting from an agreement under subsection 1 may not be used by the carrier as a reference or base rate for any other contractual arrangement.

4. In the event that the expense-reduction target specified in subsection 1 is not achieved, either in whole or in part, the Governor shall request funding to the extent necessary to address any resulting funding shortfall.

PART AA