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Government Relations Update – May 17, 2011

State Issues


  • Commonwealth Revenue Projections: On May 3, 2011, the Pennsylvania Department of Revenue reported that annual state tax collections through April 30th had exceeded estimates, resulting in a $506 million surplus in the state's general fund. As a result of increased tax revenues and expense reductions, the Commonwealth is now predicting a fiscal year-end surplus for the first time since 2008. Democratic leaders recommend using the expected surplus to ease proposed spending cuts to next fiscal year's education and public welfare budgets. Governor Corbett has cautioned that future budget years will be extremely difficult, and the Governor and Republican legislative leaders instead plan to use any surplus funds to repay amounts borrowed from the federal government to make up shortfalls in Pennsylvania's unemployment compensation fund, to repay $100 million originally transferred from the Mcare Fund to balance the current budget, and to replenish reserves in the Commonwealth's general fund.


  • H.B. 1485: General Fund Act. On May 10, 2011, Representative Bill Adolph (R-Delaware), Chairman of the House Appropriations Committee, introduced a 2011-2012 state budget proposal from the House Republicans. Under the House Republican proposal, public school education would receive a $210 million net funding increase compared to the Governor's proposed budget and higher education would receive $387 million in additional funding compared to the Governor's proposed budget. Hospital supplemental payments for obstetrics and neonatal services, burn centers, critical access hospitals and trauma centers, which would be eliminated under the Governor's proposed budget, would be restored to 90% of current fiscal year appropriations under the House Republican proposal. Hospital inpatient and outpatient line items would be slightly reduced compared to the Governor's proposal. Finally, the proposal would reduce the Department of Public Welfare (DPW) budget by $470 million. The bill will be sent to the full House for consideration on or about the week of May 23rd. House and Senate leaders continue to assert that the budget will be finalized before the constitutional deadline of June 30th. The Hospital Association of Pennsylvania (HAP) commented that the House Republican proposal was preferable to the Governor's plan, but HAP seeks full restoration of all hospital payments and the entire DPW budget.
  • H.B. 1419: Certificate of Merit. On April 28, 2011, Representative Cutler (R-Lancaster) introduced legislation to amend the Certificate of Merit Act. The Act currently requires that a plaintiff in a professional malpractice suit must file a certificate of merit signed by the attorney or party that an appropriately licensed professional has supplied a written statement that there exists a reasonable probability that the care, skill or knowledge exercised or exhibited in the treatment, practice or work that is the subject of the complaint fell outside acceptable professional standards and that such conduct was a cause in bringing about the harm. The amendment would also require: (1) that the written statement by the licensed professional be filed with the complaint; and (2) that the licensed professional (a) affirm that he has read the complaint, (b) possess sufficient education, training, knowledge and experience to provide credible, competent testimony, and (c) provide with the complaint a resume or curriculum vitae attesting to his credentials. Representatives Reichley (R-Berks, Lehigh) and Simmons (R-Lehigh, Northampton) serve as co-sponsors of the legislation, which has been assigned to the House Judiciary Committee. HAP supports the bill.
  • S.B. 5: On May 3, 2011, the Senate unanimously passed legislation sponsored by Senator Erickson (R-Chester, Delaware) to develop and expand community based health care clinics. The clinics would provide uninsured patients with a centralized site for medical care and create a partnership between patients, physicians, nurses and clinical staff members. Senators Browne (R-Lehigh, Monroe, Northampton) and Mensch (R-Bucks, Lehigh, Montgomery, Northampton) serve as co-sponsors of the legislation, which has been sent to the House and referred to the Health Committee. HAP supports the bill, since it would provide additional funding to the St. Luke's Miners Health Centers and similar health centers.

Federal Issues


  • Accountable Care Organizations: The American Medical Group Association (AMGA) represents medical groups and organized systems of care, including some of the nation's largest integrated healthcare delivery systems. On May 11, 2011, the AMGA sent a letter to the Centers for Medicare and Medicaid Services (CMS) stating its "concerns about the proposed rule establishing the Medicare Shared Savings Program through implementation of Accountable Care Organizations (ACOs)." The letter states that the proposal is "overly prescriptive and operationally burdensome, rendering the incentives too difficult for ACOs to achieve in order for the voluntary program to be attractive to potential participants." Based on an AMGA survey of its membership, 93% of respondents stated that they would not participate in the ACO program unless the requirements in the final rule reflect major modifications. The AMGA asserts that, "[i]n their current form, the requirements would render the ACO program a missed opportunity to inject value and accountability into the delivery system." Other organizations and providers have sent similar letters to CMS expressing concerns about the proposed rule. The public comment period for the proposed rule ends on June 6, 2011.
  • Federal Budget Proposal: On May 10, 2011, Senator Pat Toomey (R-PA) released his first budget proposal. Senator Toomey asserts that his plan would balance the federal budget by 2020 without raising taxes and would result in a small surplus in 2021. The plan would repeal the Patient Protection and Affordable Care Act (PPACA), reduce spending and entitlement programs, introduce medical liability reforms and permanently modify the sustainable growth rate formula for physicians. Senator Toomey's plan includes a block grant transition similar to the budget proposed by House Republicans. The federal government partners with states to cover more than 60 million low-income families and seniors, including most nursing home residents, as well as disabled people of any age, under the Medicaid program. Under Senator Toomey's plan, Medicaid would be converted from an open-ended program in which the federal government pays about 60% of the cost of services into a block grant that would give each state a fixed sum of money.

    HAP opposes the block grant portion of the plan, since the number of uninsured Americans would likely increase significantly. The Pennsylvania Democratic Party criticized the plan by asserting that it lacks specificity.

  • Hospital Telemedicine Credentialing Standards: On May 5, 2011, CMS published a final rule revising the hospital conditions of participation related to the credentialing and privileging of physicians who provide telemedicine services, including teleradiology services. The final rule allows the governing body of a hospital to rely upon the credentialing and privileging decisions made by a distant-site hospital or telemedicine entity when making its own decisions on privileges for the individual distant-site physicians and practitioners providing such services if certain conditions are met, including a written agreement with the distant-site hospital.
  • Health Care Liability Reform: On May 11, 2011, the House Energy and Commerce Committee approved the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act, which was introduced by Representative Phil Gingrey (R-GA) earlier this year. The Act would set conditions for medical malpractice claims and place limits on non-economic and punitive damages. The Senate is unlikely to support the proposed legislation.
  • PPACA Appeals: On May 10, 2011, the United States Court of Appeals for the Fourth Circuit heard two cases concerning the constitutionality of PPACA and thus became the first federal appellate court to hear these arguments. While a computer program randomly assigns appellate panels, the three judges were considered heavily biased in favor of the Administration, since two judges were named by President Obama and the third was also named by a Democratic president. Media reports concluded that the panel supported the position that Congress did not exceed its authority to regulate interstate commerce by requiring that individuals obtain health insurance.