PHOENIX (AP) — Arizona Gov. Doug Ducey has signed legislation that will charge hospitals a new fee but bring them higher Medicaid payments in return.

Ducey signed the bill that overwhelmingly passed the Legislature on Wednesday. It will assess hospitals about $350 million a year for services provided to outpatients.

In return, hospitals, physicians and other providers would receive higher payments for caring for patients with Medicaid expected to total $1.1 billion.

The higher payments from the federal program are expected to eliminate an estimated $1 billion in unreimbursed costs.

The proposal is similar to a hospital assessment that helps pay the state's share of providing Medicaid coverage to people earning between 100% and 138% of the federal poverty limit.

That assessment was passed by lawmakers in 2013 to boost coverage under provisions of former President Barack Obama's Affordable Care Act. It was highly contentious among many Republican lawmakers, and former GOP Gov. Jan Brewer fought for months to get the Legislature to approve it.

She then defended it in court, and the state Supreme Court eventually ruled against lawmakers who contended it was a tax requiring a two-thirds vote.

The current proposal was backed by a broad coalition of insurers and medical groups, including one that represents many large hospital chains in the state.