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Government Relations Update – March 6, 2012

Pennsylvania Issues


Newborn Payment Policy:  On June 30, 2011, the Pennsylvania General Assembly enacted significant changes to the statute known as the Public Welfare Code, 62 P.S. § 101 – 1503, which governs many Department of Public Welfare (DPW) programs, including Medicaid, and these changes were signed into law by Governor Corbett as Act 22 of 2011.  These changes grant DPW the authority to make significant changes to Medical Assistance (MA) benefits and provider reimbursement rates without the usual oversight by the General Assembly or the Independent Regulatory Review Commission.  In the past, when expenditures, especially for Medical Assistance, exceeded the amount appropriated in the budget, the Governor would ask for one or more “supplemental appropriations” to fund the additional costs.  Act 22 requires that DPW not exceed its budget as passed on June 30, 2011, although DPW may reallocate funds within its budget.

On February 18, 2012, DPW announced proposed payment changes effective on April 1, 2012 for normal MA births allowing providers a single payment equal to the existing maternal case rate for both delivery and subsequent care for the mother and newborn, as opposed to the historically separate and additional payment for newborn care.  This new policy is scheduled to begin on April 1, 2012.

The HealthChoices Program is the name of one of Pennsylvania’s mandatory managed care programs for MA recipients.  Approximately 26% of all births at St. Luke’s University Health Network are paid pursuant to the HealthChoices Program.  DPW has not indicates whether the MA payment change will also apply to the HealthChoices Program.  If the payment changes apply to the HealthChoices Program, St. Luke’s will experience an additional annual payment reduction of $1.2 million.  St. Luke’s has submitted comments to DPW urging that the payment changes be reversed and requesting further clarification relating to the impact on the HealthChoices Program.  The Hospital Association of Pennsylvania (HAP) has offered similar comments on behalf of its members.

Medical Care Availability and Reduction of Error (Mcare) Funding:  On February 29, 2012, the Pennsylvania Supreme Court unanimously ruled against the Pennsylvania Medical Society (PAMED) and HAP in their lawsuit challenging the state’s failure to fully fund the Mcare Fund abatement program, also known as the Health Care Provider Retention (HCPR) program.  The Supreme Court’s decision overturned a Commonwealth Court ruling in favor of PAMED and HAP.  A second lawsuit, filed in October 2009 by PAMED and HAP, challenged the illegal transfer of $100 million from the Mcare Fund to the state’s general fund.  The court has not yet issued an opinion in the separate Mcare Fund lawsuit. 

State Tax Revenues:  On March 1, 2012, the Pennsylvania Department of Revenue reported that the Commonwealth had collected $1.7 billion in General Fund revenues in February, which was $15.6 million, or 0.9%, more than anticipated.  General Fund collections total $15.5 billion, which is $481.6 million, or 3 percent, below budget for the fiscal year to date.

Proposed Merger of PSA and PHC4 into Department of Health:  In Governor Corbett’s recently released budget for the coming fiscal year, he proposed merging the Patient Safety Authority (PSA) and PHC4 under the Department of Health.  This is a significant departure from the provisions of the Mcare Act, which established the PSA as an independent agency in 2002.  The Governor has not developed a formal plan for the merger, so there are few details available regarding the proposal.  HAP is monitoring the situation.

New Jersey Issues


State Budget:  On February 21, 2012, Governor Chris Christie (R) proposed a $32.1 billion budget for the next fiscal year.  The budget plan, which would reduce personal income taxes, increase funding to schools and meet state pension obligations, represents an increase in spending of 3.7% as compared to the current budget.  The Governor explained that the improving economy and two years of prudent fiscal management allows the additional expenditures.  State funding for New Jersey hospitals would remain unchanged from the fiscal current year.  The New Jersey Hospital Association (NJHA) praised the Governor’s proposal.  Standard & Poor’s criticized the Governor’s revenue assumptions as overly optimistic.  Democratic leaders asserted that the budget plan favors wealthy tax payers and places an excessive burden on the middle class.  The legislature must adopt a budget by July 1st, which is the beginning of New Jersey’s new fiscal year.

Federal Issues


Health Insurance Exchanges:  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 February 22, 2012, the United States Department of Health and Human Services (HHS) awarded planning grants to ten states to assist in the development of health insurance exchanges, including $34 million to Pennsylvania and $7.6 million to New Jersey.  Pennsylvania previously received $3.4 million to conduct a feasibility study for the creation of an exchange.  HAP and the NJHA continue to advocate 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.

Proposed Rule on Sixty-Day Repayment of Overpayments:  PPACA requires a person who has received an overpayment from the government to report and return the overpayment to the Secretary of HHS, or to any applicable state or other relevant contractor, along with a written explanation of the reason for the overpayment. The report and return of the overpayment must occur by the later of: (1) the date which is sixty days after the date on which the overpayment is identified; or (2) the date that any corresponding cost report is due, if applicable. The failure to make such a report and repayment creates potential liability under the False Claims Act (FCA) and the Civil Monetary Penalties Law, under which the provider could be excluded from participation in federal healthcare programs.

On February 21, 2012, the Centers for Medicare & Medicaid Services (CMS) issued the much-anticipated proposed rule defining the reporting and repayment obligations. Critical to the determination of when a provider has an obligation to report and return an overpayment is: (1) the definition of the term overpayment; and (2) when such overpayment is identified. Under the proposed rule, CMS would adopt the statutory definition of an overpayment, which is defined as any funds that a person receives or retains under the Medicare program to which the person, after applicable reconciliation, is not entitled. Examples of such overpayments include, among other things, payments for non-covered services, payments in excess of allowed amounts, errors and non-reimbursable expenditures in cost reports, and receipt of funds from Medicare when another party is primarily liable.

If left unchanged, the proposed rule would substantially increase the burdens on providers and suppliers. Most notably, the proposed rule would create a new ten-year look-back period for overpayments. In addition, the proposed rule would create little certainty by establishing a deliberate ignorance or reckless disregard standard for conducting a reasonable investigation into allegations of potential overpayments and includes preamble language suggesting a new standard of “all deliberate speed” on internal investigations into potential overpayments.  HAP is advocating for changes to the proposed rule.