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Government Relations Update - December 11, 2012

Pennsylvania Issues


Medical Assistance Modernization Act: The Medical Assistance Modernization Act of 2010, also known as Act 49, authorizes the Pennsylvania Department of Public Welfare (DPW) to impose a statewide hospital 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 the passage of Act 49 in July 2010, since it serves as a mechanism to secure additional federal matching funds intended to be distributed to hospitals through increased medical assistance payments.

During the state fiscal year ending June 30, 2011, DPW imposed a 2.9% hospital inpatient revenue tax pursuant to Act 49. The rate increased to 3.22% for the state fiscal years ending June 30, 2012 and June 30, 2013. However, beginning on July 1, 2011, the state allocated $159 million to its general fund from the federal matching funds originally expected to be distributed to hospitals under Act 49.


S.B. 1281: Purely Public Charity Act. On October 3, 2011, Senator Wayne Fontana (D-Allegheny) introduced legislation to amend the Institutions of Purely Public Charity Act (Act 55 of 1997) so that municipalities would be permitted to impose real estate taxes on not-for-profit entities, including hospitals but excluding property owned by police, fire or emergency services organizations. The legislation would have exempted the first $200,000 of assessed property value from taxation. The bill was assigned to the Senate Finance Committee, but it was not considered during the 2011-2012 legislative session. On December 3, 2012, Senator Fontana announced that he will reintroduce the bill during the new legislative session beginning on January 1, 2013. HAP opposes the bill.

New Jersey Issues


S.2135: New Jersey Health Benefit Exchange Act. The Patient Protection and Affordable Care Act (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 must design one for it. On October 4, 2012, the New Jersey State Senate approved legislation establishing a statewide health insurance exchange, and the New Jersey State Assembly passed an identical bill on October 18, 2012. Assemblymen John DiMaio (R-Warren, Hunterdon) and Erik Peterson (R-Warren, Hunterdon) both voted against the legislation. On December 6, 2012, Governor Christie (R-NJ) vetoed the legislation. According to the Governor, the federal government has failed to issue sufficient guidance necessary to evaluate the potential costs of the exchange. The Governor vetoed a similar bill in May prior to the United States Supreme Court decision regarding the constitutionality of PPACA.

S.2241: Medicaid Managed Care Organizations. On November 29, 2012, the New Jersey State Senate approved legislation prohibiting Medicaid managed care organizations from reducing provider reimbursement rates without first receiving approval from the New Jersey Department of Human Services (DHS). The legislation was introduced following Horizon NJ Health's decision to decrease payments to home healthcare providers by ten 10%. Although the New Jersey Hospital Association (NJHA) strongly supports the measure, Governor Christie and the DHS oppose it claiming that it would create excessive government intervention. Senator Doherty (R-Warren, Hunterdon) voted against the measure.

Federal Issues


IRS Compliance Initiatives: On November 30, 2012, the Internal Revenue Service (IRS) announced plans to examine governance and compensation practices for 200 charitable organizations. The examination is expected to include a review of: (1) board and committee structure; (2) compensation reported on Form 990 for organizations with large revenues and low wages to determine whether the organizations are properly reporting salary and other compensation; and (3) sources and uses of funds generated by exempt organizations to verify adherence to not-for-profit purposes and mission. Further guidance from the IRS is expected following the completion of these examinations.

Medicare CY 2013 Outpatient PPS Final Rule: On November 15, 2012, the Centers for Medicare & Medicaid Services (CMS) published its final rule updating Medicare policies and payment formulas for outpatient services provided by hospitals and ambulatory surgical centers. The rule is effective January 1, 2013 and includes: (1) a 1.8% increase for hospital outpatient rates, subject to a 2% reduction for hospitals that do not meet quality reporting requirements; and (2) a 0.6% increase for ambulatory surgical center rates. The Finance Department is reviewing the rule and evaluating the final impact to the St. Luke's University Health Network.

Medicare Physician Fee Schedule Rule. The Sustainable Growth Rate (SGR) formula was devised in 1998 as a method to control healthcare spending by tying Medicare costs to growth in the economy. However, as medical costs increased more quickly than inflation, the SGR formula would have caused physician payment reductions through Medicare each year since 2002. In response, Congress has passed bills routinely to delay or avert the implementation of the payment reductions, thereby avoiding the impact of the SGR formula. On February 17, 2012, Congress most recently delayed the impact of the SGR formula and extended the then current Medicare physician fee schedule rates through December 31, 2012. Senator Max Baucus (D-MT), Chairman of the Senate Finance Committee, recently announced plans to introduce legislation to extend the rates and avoid the sharp fee reduction.

Medicare Dependent Hospitals. On December 3, 2012, Senator Bob Casey (D-PA) and 30 other Senators signed a letter to Senator Baucus urging him to include an extension to the Medicare Dependent Hospital (MDH) program with any physician fee schedule rate correction. CMS defines a MDH as a hospital that: (1) is located in a rural area; (2) has 100 or fewer beds: (3) is not classified as a sole community hospital; and (4) attributes at least 60% of its inpatient days or discharges to Medicare beneficiaries. St. Luke's Hospital - Miners Campus (SLM) is one of 13 Pennsylvania hospitals and 200 hospitals across the country designated as a MDH. CMS has historically paid MDHs an increased rate to offset their inpatient operating costs. Some MDHs have also qualified for a low-volume hospital payment adjustment by CMS for hospitals experiencing a significant volume decrease.

Sunshine Act Final Rule Enters Last Stage of Clearance. Pursuant to PPACA, manufacturers of drugs, devices, biologics and medical supplies covered under Medicare or Medicaid will be required to report annually to the Secretary for the Department of Health & Human Services certain payments or other transfers of value to physicians and hospitals. On November 27, 2012, CMS sent to the White House Office of Management and Budget for final clearance its long-awaited final rule implementing the "Physician Payment Sunshine Act" provisions required by PPACA. Covered manufacturers and suppliers are expected to begin collecting reportable data on January 1, 2013.