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Government Relations Update - August 21, 2012

Pennsylvania Issues


State Budget: On June 30, 2012, Governor Corbett approved the Commonwealth's budget, which authorizes $27.656 billion in spending. The budget increases state spending by about 1.5% compared to the prior fiscal year without the introduction of any new taxes. The final budget eliminates proposed cuts to hospital supplemental payments for obstetrics and neonatal services, as well as proposed reimbursement reductions to burn centers, critical access hospitals and trauma centers, and restores these payments to levels consistent with the 2012 state budget. Every Republican member in the House and Senate supported the budget, together with three Democrats in the Senate and eleven Democrats in the House, including Representative Jennifer Mann (D-Lehigh). While Republicans praised the budget for meeting the needs of the Commonwealth without raising taxes, Democratic leaders criticized that the budget eliminates necessary social services.


Act 109 of 2012 (HB 1820): Employee Overtime. On July 5, 2012, Governor Corbett signed Act 109 into law, which makes the Pennsylvania Minimum Wage Act (PMWA) consistent with the federal Fair Labor Standards Act (FLSA) regarding the calculation of overtime. The PMWA requires that employers pay overtime at a rate of 1½ times the normal rate of pay after 40 hours of work for covered employees. Many hospitals and nursing homes throughout the country pay their employees pursuant to an "8 and 80" overtime rule, under which employees are paid overtime for all hours worked in excess of eight in a single day and all hours worked in excess of 80 in a two week period. Section 7(j) of the FLSA specifically allows this practice for hospitals. A decision in March 2010 by a judge in the Philadelphia Court of Common Pleas called that practice into question. Act 109 removes any ambiguity resulting from the case and protects hospitals engaged in this practice. The Hospital Association of Pennsylvania (HAP) supported the bill.

New Jersey Issues


A. 1608: Janet's Law. On June 25, 2012, the New Jersey legislature passed a bill requiring schools to have automated external defibrillators (AEDs) on school grounds with trained operators at all sports events. The bill would also eliminate civil liability for coaches and staff when using an AED device in response to a cardiac emergency. Assemblyman Erik Peterson (R-Hunterdon, Warren) served as a co-sponsor of the legislation, which passed unanimously. The bill has been forwarded to Governor Christie (R) for his signature. St. Luke's Hospital -Warren Campus plans to assist the Phillipsburg School District in its efforts to comply with the bill. Pennsylvania passed similar legislation in May 2012, although Pennsylvania school districts are only required to provide information or training regarding sudden cardiac arrest to coaches and parents. Pennsylvania schools are not required to have AEDs on school grounds.

S. 782: New Jersey Hospital Disclosure and Public Resource Protection Act. As previously reported, the New Jersey legislature approved a bill requiring each for-profit hospital to disclose the following information to the Department of Health and Senior Services and on each hospital's web site: audited annual and unaudited quarterly financial statements; a list of all payments from the hospital to any entity owned or managed by any owner, board member or officer of the hospital; a list of all compensation, including salaries, benefits, bonuses, and deferred compensation, paid to each board member and officer of the hospital; a chart that identifies all legal entities related to or affiliated with the hospital; a list of investors in the hospital; a list of all joint ventures involving the hospital; the amounts paid to any affiliates for management or consulting services; and a description of major plant or facility expansion projects at the hospital, including the project location, scope, timeline for completion, and estimated cost of and sources of funding for construction. On August 8, 2012, Governor Christie vetoed the legislation, asserting that the proposal needs additional analysis. Assemblymen DiMaio (R-Hunterdon, Warren) and Peterson (R-Hunterdon, Warren) and Senator Doherty (R-Hunterdon, Warren) had voted against the measure and argued that it would require additional and unnecessary reporting. The New Jersey Hospital Association also opposed the legislation.


Legislative Visits: On August 8, 2012, Congressman Leonard Lance (NJ-7-R) toured St. Luke's Hospital -Warren Campus and met with hospital trustees and administrators to discuss relevant issues. In addition, Scott Wolfe and Jane George had introductory meetings during the past few weeks with State Senator Michael Doherty (R-Hunterdon, Warren), Assemblyman Erik Peterson (R-Hunterdon, Warren) and Phillipsburg Mayor Harry Wyant.

Federal Issues


Medicare Inpatient Prospective Payment System (IPPS) Final Rule impact: On August 1, 2012, the Centers for Medicare & Medicaid Services (CMS) issued its final rule for the fiscal year 2013 Inpatient Prospective Payment System (IPPS). Pursuant to the final rule, CMS announced that it will increase inpatient hospital payments by 2.3% effective October 1, 2012, which is a significant improvement from its earlier proposed rate reduction of 0.8%. In addition, the rule outlines parameters surrounding the Hospital Readmissions Reduction Program effective October 1, 2012, under which hospitals with higher-than-expected readmission rates will experience reductions in their Medicare payments. For the first year of the program, CMS will use three existing 30-day readmission measures for heart attack, heart failure and pneumonia patients.

On August 16, 2012, HAP circulated to member hospitals an analysis of the estimated payment changes based on the final rule. Congressman Tom Reed (R-29-NY) recently introduced legislation providing for a twelve month extension of the MDH program, with Congressman Holden (D-17-PA) serving as a co-sponsor. Similar legislation has been introduced by Senators Schumer (D-NY) and Grassley (R-IA). HAP and the American Hospital Association support the legislation. Jane George is working with Senators Casey (D-PA) and Toomey (R-PA) to obtain their support for the extension.

CMS Proposed Regulation: On July 6, 2012, CMS issued a proposed rule to increase payments to primary care physicians by approximately 7%. The proposal would also update payment policies and rates under the Medicare Physician Fee Schedule for calendar year 2013. CMS is seeking comments on the proposal and plans to issue a final rule by November 1, 2012.

IRS Proposed Regulations: The Patient Protection and Affordable Care Act (PPACA) added Section 501(r) to the United States Tax Code, which requires hospitals to meet certain criteria in order to maintain their tax-exempt status pursuant to Section 501(c)(3). According to Section 501(r), tax-exempt hospitals must: (1) conduct a community health needs assessment (CHNA) every three years; (2) develop and adopt a written financial assistance policy and a policy related to emergency medical care; (3) limit the amount charged to individuals who are eligible for financial assistance for emergency or other medically necessary care; and (4) limit extraordinary collection actions before making reasonable efforts to determine an individual's eligibility for financial assistance. On June 22, 2012, the Internal Revenue Service released proposed regulations interpreting and implementing Section 501(r), including proposed CHNA requirements. HAP has advised member hospitals to develop an internal review team to assess the impact of these proposed regulations and to ensure compliance when the regulations become effective.