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Government Relations Update – July 26, 2011

State Issues


  • Act 49 Update: The Medical Assistance Modernization Act of 2010, also known as Act 49, authorizes the Department of Public Welfare (DPW) to impose a statewide assessment based on net operating revenues derived from inpatient services provided by licensed acute care hospitals in Pennsylvania. The Hospital Association of Pennsylvania (HAP) supported Act 49, since it serves as a mechanism to secure additional federal matching funds, which are then distributed to hospitals through increased medical assistance payments.

    In connection with the recently passed state budget, the tax rate imposed under Act 49 increased from 2.9% for the state fiscal year ending June 30, 2011 to 3.22% for the state fiscal year ending June 30, 2012. More importantly, the state allocated $159 million to its general fund from the federal matching funds originally expected to be distributed to hospitals under Act 49. Democratic leaders have criticized the increased rate and the redistribution of Act 49 funds as a violation of the Governor's promise not to raise taxes or implement new fees. The Governor asserts that the assessment is not a new tax or fee, since it was passed by the prior administration with the support of the hospital community. HAP and DPW are in the process of recalculating the assessments for Pennsylvania hospitals.

  • Emergency Department Overcrowding: On July 5, 2011, Eli Avila, Secretary of the Department of Health (DOH), sent a memorandum to all chief executive officers of Pennsylvania hospitals regarding overcrowding in emergency departments. Secretary Avila instructed that hospitals should not use hallway space for emergency department beds and commented that the DOH would focus on use of emergency room space in upcoming surveys. According to Secretary Avila, the DOH received 857 reports regarding the misuse of emergency department space during a recent six month period.
  • Redistricting: Pennsylvania lawmakers are required to redraw federal and state legislative districts every ten years based on the most recent national census data. A new redistricting map will be introduced as a bill later this year and will need to pass in the general assembly and then be signed by Governor Corbett. The reconfiguration process is led by a five member commission comprised of the House and Senate majority and minority leaders and a fifth bipartisan member who serves as chair. Census numbers confirm that central and eastern portions of the state are growing, while western portions are contracting. Philadelphia will likely lose some state legislative seats to districts outside the city's limits. It is still unknown what impact to expect in the Lehigh Valley. The new district boundaries will take effect during the presidential primary on April 24, 2012.
  • Nurse Patient Ratios: On March 28, 2011, Senator Solobay (D-Washington) reintroduced legislation which would require certain nurse-to-patient staffing ratios in various units of Pennsylvania hospitals. The bill would require hospital compliance to ensure initial and continued hospital licensure by the DOH. Senator Solobay asserts that higher staffing levels would result in fewer hospital acquired infections, improved care, and shorter hospital stays. Representative Mundy (D-Luzerne) recently announced plans to introduce similar legislation. HAP opposes mandatory nurse ratios since they would create new administrative burdens on hospitals and reduce the ability of hospitals to adjust to changing staffing needs. Similar bills have been introduced in previous legislative sessions, but they remained in committee and did not receive floor consideration.

Federal Issues


  • Efforts to Raise the Debt Ceiling: On February 18, 2010, President Obama created the National Commission on Fiscal Responsibility by executive order. The commission was charged with addressing the nation's fiscal challenges and identifying policies for improvement. As previously reported, the co-chairs released draft recommendations on November 10, 2010, which included cuts to domestic and military spending, an increase to the Federal gasoline tax, elimination of certain tax breaks and an increase in the retirement age for social security. The proposal also called for reductions in federal spending on graduate and indirect medical education, elimination of the Medicare bad debt program, which provides additional funding to hospitals treating seniors unable to pay their bills, reductions to the Medicare Advantage program and decreased disproportionate share payments to hospitals. The commission asserted that these recommendations would reduce the federal deficit by nearly $4 trillion over the next decade.

    As President Obama and Congress continue to negotiate an agreement to raise the debt ceiling by the August 2nd deadline, the entire hospital community remains concerned that hospitals will be forced to absorb significant reimbursement cuts, given that Medicare and Medicaid comprise 22.6% of all federal spending. Reductions in Medicare and Medicaid spending would significantly impact hospitals, since about 55% of all hospital revenues nationally are generated by Medicare and Medicaid payments. In a related event, Congresswoman Schwartz (PA-13-D) and 64 House Democrats sent a letter to the House and Senate leadership on July 13, 2011 urging Congress to reject any proposed reductions in federal spending on graduate and indirect medical education programs.

  • Inpatient Prospective Payment System (IPPS) Regulation: On April 19, 2011, the Centers for Medicare & Medicaid Services (CMS) issued its hospital inpatient and long-term care prospective payment system (PPS) proposed rule for federal fiscal year (FFY) 2012. On July 21, 2011, more than half of the House (219 members) and 45 senators urged CMS to reconsider the coding offset contained in the proposed rule. If implemented as proposed, the policy would cut hospital payments by 6.05%, or $6.3 billion, and would create substantial volatility in inpatient PPS rates for the next two years. Together with other policy changes, this cut would cause FFY 2012 hospital payments to decrease by 0.55% on average, or $498 million total, compared to FFY 2011 payments. The letters were spearheaded by Representatives Pete Sessions (R-TX) and Joe Crowley (D-NY) in the House and Senators Debbie Stabenow (D-MI) and Lisa Murkowski (R-AK) in the Senate. Senators Toomey (PA-R), Casey (PA-D), Lautenberg (NJ-D) and Menendez (NJ-D), and all 19 Pennsylvania House members, signed the letter. Congressman Garrett (NJ-5-R), who represents Warren Hospital, did not sign it.
  • H.R. 2500: The Equal Access and Parity for Multi-Hospitals Act. As reported previously, 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 only allows 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. On July 12, 2011, legislators from New York and Texas introduced a bill to allow multi-campus inpatient facilities with a single provider number to receive incentive payments at each facility. The bill has been assigned to the House Ways and Means Committee and the House Energy Committee. We are contacting House members within our service areas to request their support for the bill.