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Government Relations Update – June 14, 2011

State Issues


  • State Budget: On May 24, 2011, the House Republicans introduced a 2011-2012 state budget proposal. Under the House Republican proposal, 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. 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 and decrease hospital payments under the Medical Assistance Modernization Act (Act 49). 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. Senate leaders and members of the Corbett administration continue efforts to complete the budget before the constitutional deadline of June 30th. Senate leaders have indicated that they intend to restore a portion of these payments, although the exact amount has not been announced.
  • Phase Out of Mcare Fund: The Medical Care Availability and Reduction of Error Fund (Mcare) was created by Act 13 of 2002 and signed into law on March 20, 2002. The Mcare Fund is a medical liability coverage fund administered by the Commonwealth of Pennsylvania. Currently, Pennsylvania physicians are required by law to have $500,000 in primary liability coverage plus $500,000 in excess coverage. Physicians can obtain the first $500,000 coverage layer either in the private market or through the Joint Underwriting Association (JUA), a non-profit association created by the Mcare Act to provide professional liability coverage to health care providers who cannot obtain medical professional liability insurance in the private market. Physicians obtain the second layer of coverage from the Mcare Fund.

    The Mcare Act mandates that the Mcare Fund will be eventually retired in two steps. The Pennsylvania Insurance Commissioner determines whether each step is implemented based upon a review of whether the private market can bear increased primary limits. In the first step, Mcare coverage would be stepped down to $250,000, pushing the level of primary insurance to $750,000. When the Commissioner implements the second step, physicians would be required to have $1 million in primary coverage and Mcare coverage would cease.

    The Commissioner is currently studying whether to step down Mcare coverage to $250,000. In 2005, 2007 and 2009, the Insurance Department determined that there was not sufficient capacity in the private insurance market to handle the step down. HAP and the Pennsylvania Medical Society support a phase out of the Mcare fund and believe that sufficient capacity exists to handle the step down. In order to offset the increased cost to providers in the step down, HAP proposes that existing Mcare surplus funds be used to reduce Mcare surcharges for 2012 and 2013. Seymour Traub, former Senior Vice President & General Counsel for St. Luke's Hospital & Health Network, and Ken Vail, Network Director of Risk Management, provided HAP with recommendations and support for its proposal.


  • H.B. 1400: Primary Stroke Designation Act. On May 24, 2011, Representative Douglas Reichley (R-Berks, Lehigh) introduced legislation directing the Department of Health to designate Primary Stroke Centers (PSCs) for the care and treatment of stroke patients. Pursuant to the bill, emergency medical service providers would be required to transport stroke patients to the closest PSC. Opponents to the bill argue that stroke patients need immediate care by the nearest acute care hospital regardless of designation. St. Luke's Hospital - Allentown Campus and St. Luke's Hospital -Bethlehem Campus were certified as PSCs by the Joint Commission in 2007. Representative Reichley has introduced similar bills in prior legislative sessions, but they did not pass. HAP has not yet commented.


  • Pennsylvania Primary Election: The Pennsylvania primary elections were held on May 17, 2011. Among other races, Representative Reichley secured the Republican nomination for Lehigh County Court of Common Pleas, and Lehigh County Commissioner Dan McCarthy won the Democratic nomination. The general election will take place on November 8, 2011.

Federal Issues


  • S. 296: Preserving Access to Life Saving Medications Act. On February 7, 2011, Senator Casey (D-PA) co-sponsored legislation intended to help prevent shortages of prescription drug medications. The proposed legislation requires prescription drug manufacturers to notify the Food and Drug Administration (FDA) of any discontinuance, interruption or adjustment in the manufacture of a drug that may result in a shortage. Senator Casey claims that drug shortages threaten public health by preventing patients from accessing medications that are essential to their care. The American Hospital Association (AHA), the American Society of Health System Pharmacists and HAP support the legislation, which is currently in the Senate Committee on Health, Education, Labor, and Pensions.
  • H.R. 1216: Public Health Service Act. The Patient Protection and Affordable Care Act (PPACA) includes an annual $230 million direct appropriation for graduate medical resident training programs from 2011 to 2015. On May 26, 2011, the House of Representatives passed a bill which would convert funding for graduate medical resident training programs from mandatory to discretionary funding. Republican leaders assert that they support graduate medical education, but they believe the appropriation should be evaluated annually along with similar programs during the regular appropriations cycle. Democratic leaders responded that the bill is another example of the Republican effort to disrupt, dismantle and defund PPACA. Congressmen Dent (R-15) and Fitzpatrick (R-8) voted in favor the bill. Congressman Holden (D-17) voted against the measure. The bill has been referred to the Senate Committee on Health, Education, Labor and Pensions, although there are no plans to introduce the bill.


  • Electronic Health Record Incentives for Multi-Campus Hospital Act: The American Recovery and Reinvestment Act of 2009 provides financial incentives for the adoption of electronic health records by certain dates. However, the act currently allows only one incentive payment for multi-campus inpatient facilities operating under the same Medicare provider number, like St. Luke's Hospital - Bethlehem Campus and St. Luke's Hospital - Allentown Campus. Conversely, multi-campus inpatient facilities operating under separate Medicare provider numbers receive incentive payments at each facility. In the coming weeks, legislators in the House of Representatives plan to introduce a bill to allow multi-campus inpatient facilities with a single provider number to receive incentive payments at each facility. Similar legislation was introduced during the previous legislative session, but it was not adopted. The AHA, the Association of American Medical Colleges and Premier will support the legislation once introduced.
  • PPACA Appeals: In January, Judge Roger Vinson of the United States District Court for the Northern District of Florida overturned PPACA in its entirety. On March 8, the Obama Administration appealed the decision to the United States Court of Appeals for the Eleventh Circuit. The three judge panel assigned to the case is comprised of two Democratic appointees and one Republican appointee. The panel heard oral arguments on June 8, 2011. According to media reports, the panel appeared sympathetic to the argument that the individual mandate is unconstitutional. This case involves the State of Florida and 26 other states (including Pennsylvania) and has thus drawn increased national attention. No decision is expected for several months, and legal experts anticipate an eventual appeal to the United States Supreme Court regardless of which side prevails before the United States Court of Appeals for the Eleventh Circuit.