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Government Relations Update – January 24, 2012

Pennsylvania Issues


  • H.B. 2052: Resolving Health Care Contract Disputes. On December 9, 2011, Representative Randy Vulakovich (R-Allegheny) introduced legislation to address contract disputes between health care insurers and hospitals. As previously reported, the proposed bill would require that, if a contracting party desires to terminate a provider contract or permit a provider contract to expire at the conclusion of a contract term, the party must provide at least ninety days notice to the other party and to the Department of Insurance. Failure to provide notice would result in the automatic extension of the provider contract for one year on the same terms and conditions. Upon receipt of the notice, the Department of Insurance and the Department of Health would have the right to hold public hearings to analyze the impact of termination or expiration of the contract. The Department of Insurance would have the right to require mediation between the parties. If the parties were unable to agree on renewal terms, the Department of Insurance could require resolution of the dispute through arbitration. Representative Vulakovich introduced the legislation in response to the highly publicized contract dispute between the University of Pittsburgh Medical Center and Highmark Blue Cross Blue Shield.

    On December 15, 2011, the House of Representatives approved the proposed legislation by a vote of 186 to 6 in favor of the bill. The bill has been sent to the Senate Banking and Insurance Committee for consideration.  The Hospital Association of Pennsylvania (HAP) opposes the bill, since it would establish an intrusive regulatory framework and may influence health insurers to avoid good faith negotiations with hospitals.
  • H.B. 1907: Medical Care Availability and Reduction of Error (Mcare) Act. The Mcare Act currently limits the amount of punitive damages that can be awarded against a physician to 200% of the compensatory damages awarded, except in situations involving intentional misconduct. On October 24, 2011, Representative Glen Grell (R-Cumberland) introduced a proposed amendment to the Mcare Act to apply the same limitation on punitive damages to licensed personal care homes, assisted living communities and long-term care nursing facilities. On January 18, 2012, the House of Representatives approved the bill by a vote of 103 to 89. Each Lehigh Valley House Republican voted in favor of the legislation, and each Lehigh Valley House Democrat voted against the bill, except that Representative Jennifer Mann (D-Lehigh) supported the measure. Representatives Paul Clymer (R-Bucks) and Justin Simmons (R-Lehigh, Northampton ) served as co-sponsors of the bill, which has been forwarded to the Senate for consideration. HAP supports the bill.

New Jersey Issues


  • State Legislature: On January 10, 2012, newly elected state legislators were inducted into office to begin New Jersey ’s 215th legislative session. The New Jersey Assembly and Senate continue to be controlled by Democrats, who will maintain the majority through January 2014. Following the swearing in of the new legislators, Governor Chris Christie (R) addressed a joint session of the Senate and the Assembly to honor the memory of Assembly Minority Leader Alex DeCroce (R-Morris), who collapsed and died at the statehouse as the 214th legislative session concluded. Governor Christie outlined his achievements during the first two years of his term and reaffirmed his commitment to improve the quality of life in New Jersey. Governor Christie’s first term concludes in 2013.

Federal Issues


  • Bicameral Conference Committee:  On December 23, 2011, President Obama signed into law legislation averting until February 29, 2012 the 27.4% decrease to the Medicare physician fee schedule otherwise planned for January 1, 2012. The measure also extends the hospital reclassification payments under Section 508 of the Medicare Modernization Act of 2003 until February 29, 2012. Section 508 permits qualifying hospitals to reclassify into adjoining geographic areas with higher payment rates. Warren Hospital was one of 121 hospitals reclassified pursuant to Section 508.  Without legislative action, Warren Hospital would have experienced an estimated annual Medicare payment reduction of $2.5 million. As previously reported, twenty lawmakers, including Senator Bob Casey (D-PA) and Congresswoman Allyson Schwartz (PA-13-D), have been appointed to serve on a bicameral conference committee in order to facilitate a long term solution to these healthcare reimbursement issues, as well as the contemplated extension of unemployment insurance benefits and the continued temporary suspension of a portion of the employer share of social security taxes. Unfortunately, the committee is meeting for the first time this week and needs to identify about $160 billion in cost savings from other programs in order to continue funding these items at current levels. HAP, the American Hospital Association and Premier are urging committee members to reject any reductions to Medicare payments for hospital services as part of any final proposal. They argue that hospitals already face Medicare payments reductions of 2% per year beginning in 2013 as a result of the failed efforts of the special joint national debt reduction congressional committee in November.
  • Health Insurance Exchanges: As previously reported, the Patient Protection and Affordable Care Act of 2010 (PPACA) creates statewide health insurance exchanges by 2014 for individuals and small businesses to compare health insurance plans and rates. If a state fails to create an exchange, the Federal government will design one for it in accordance with PPACA. On January 19, 2012, the White House reported that 28 states had taken meaningful steps in creating exchanges. Although Pennsylvania was not included, the Commonwealth previously accepted about $3.4 million from the Federal government to explore the feasibility of creating an exchange, and the Pennsylvania Department of Insurance announced on November 22, 2011 that it would develop an exchange. On December 28, 2011, the Pennsylvania Insurance Department submitted a $33.8 million grant application to the U.S. Department of Health and Human Services to support the creation of an exchange. HAP is advocating for hospitals to retain the right to freely negotiate with insurance providers participating in the exchange to ensure competitive reimbursement rates. Otherwise, a system could be created in which the rates are not adequate to provide access to quality care.


  • H.R. 1173: Fiscal Responsibility and Retirement Security Act of 2011. On March 17, 2011, Congressman Charles Boustany (LA-7-R) introduced legislation to repeal the Community Living Assistance Services and Support (CLASS) Act. The CLASS Act, which is part of PPACA, was intended to provide long-term care insurance for individuals with qualifying disabilities that limit daily living. The program was scheduled to become effective later this year, but the Department of Health and Human Services concluded that the CLASS program was not financially sustainable and halted its implementation. Republicans have since aggressively pursued its repeal. On January 18, 2012, the House Ways and Means Committee passed the bill by a vote of 23 to 13. An affirmative vote by the full House is expected in February. It is unclear whether the Senate will support the bill. Congressman Leonard Lance (NJ-7-R) serves as a co-sponsor of the bill.