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Government Relations Update – April 2, 2013

Pennsylvania Issues


H.B. 923: Setting Minimum Nurse-to-Patient Ratios in Hospitals. On March 11, 2013, Representative Phyllis Mundy (D-Luzerne) reintroduced legislation which would require certain nurse-to-patient staffing ratios in various units of Pennsylvania hospitals. Representative Mundy asserts that the bill would improve patient safety and reduce medical malpractice claims. Representative Robert Freeman (D-Northampton) serves as a co-sponsor of the bill, which has been referred to the House Health Committee for consideration. The Hospital & Healthsystem Association of Pennsylvania (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.

S.B.4: Institutions of Purely Public Charity Act. The Pennsylvania Constitution provides that “institution[s] of a purely public charity” are entitled to exemption from real estate taxes. In 1985, the Pennsylvania Supreme Court adopted a test (HUP Test) to determine that an institution is one of purely public charity when it: (a) advances a charitable purpose; (b) donates or renders gratuitously a substantial portion of its services; (c) benefits a substantial and indefinite class of persons who are legitimate subjects of charity; (d) relieves the government of some of its burden; and (e) operates entirely free from private profit motive. In 1997, the Pennsylvania General Assembly enacted the Institutions of Purely Public Charity Act (Act 55), which clarified part (d) of the HUP Test by defining broadly the requirement to relieve the government of some of its burden. On April 25, 2012, the Pennsylvania Supreme Court revisited the HUP Test in a tax exemption appeal. The court determined that a party must meet the HUP Test to be eligible for tax exemption, and, if it fails to do so, the applicant’s ability to comply with Act 55 is meaningless. As a result, applicants for tax exemption can no longer rely on the certainty and flexibility created by Act 55. As reported previously, Senator Mike Brubaker (R-Chester, Lancaster) introduced legislation to amend the Pennsylvania Constitution and preserve the General Assembly’s role in determining whether an institution is a purely public charity. On March 20, 2013, the Senate passed the bill, which has been sent to the House Finance Committee for consideration. HAP strongly supports the bill.

Certain municipalities and school districts are considering whether to challenge tax exemptions given the uncertainty created by the Pennsylvania Supreme Court decision. On March 20, 2013, the City of Pittsburgh announced plans to challenge the tax exempt status of the University of Pittsburgh Medical Center (UPMC). City officials argue that UPMC does not deserve the exemption since it devotes less than 2% of its net patient revenues towards charity care. Pittsburgh Mayor Luke Ravenstahl (D) estimates that the amount of property and payroll taxes UPMC avoids paying to the city exceeds $20 million per year. The city is seeking a declaratory judgment to terminate UPMC’s tax exempt status effective March 31, 2007. HAP has not commented on the issue.


Pennsylvania Prevailing Wage Law: On March 26, 2013, Representative Gordon Denlinger (R-Lancaster) announced plans to introduce legislation to repeal the Pennsylvania Prevailing Wage Act. The Act generally requires that prevailing minimum wages be paid for any construction work financed by public funds where the estimated cost of the total project exceeds $25,000. The Secretary of the Department of Labor and Industry is charged with the responsibility of determining prevailing minimum wage rates for each craft within each locality. Representative Denlinger claims that by removing the prevailing wage requirement, labor costs would be reduced by up to 20%, thereby lowering construction costs for schools, roads and municipal projects.

House Republicans plan to include changes to prevailing wage laws in the transportation funding package that the General Assembly is expected to pass later this spring. They argue that if Pennsylvania spends $1.8 billion on new roads and bridges, paid for partially through a gas tax, the Commonwealth should avoid higher construction costs associated with prevailing wage rates. Conversely, union representatives and House Democrats oppose changes to the prevailing wage laws arguing that the law ensures the most skilled laborers are used on public projects.

New Jersey Issues


A.3878: Public Awareness for the Health Insurance Exchange. As reported previously, the Patient Protection and Affordable Care Act 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. New Jersey will default to a federally run health insurance exchange. On February 26, 2013, Assemblyman Herb Conaway (D-Delran) introduced legislation which would require the Department of Banking and Insurance to establish a statewide public awareness campaign regarding the New Jersey health insurance exchange. The bill would supplement the federal government’s outreach campaign intended to increase enrollment. On March 7, 2013, the Assembly Health and Senior Services Committee approved the bill, and it has been sent to the full Assembly for consideration. Assemblyman Erik Peterson (R-Hunterdon, Warren) serves on the committee and voted against the measure. The New Jersey Hospital Association supports the bill.

Federal Issues


H.R. 574: Medicare Physician Payment Innovation Act of 2013. 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 January 1, 2013, Congress most recently delayed the impact of the SGR formula and extended the then current Medicare physician fee schedule rates through December 31, 2013. If Congress fails to act again, the Medicare physician fee schedule will reduce physician payments by 24.4% on January 1, 2014.

On February 6, 2013, Representatives Allyson Schwartz (PA-13-D) and Joe Heck (NV-3-R) reintroduced legislation which would: (1) permanently repeal the SGR formula; (2) provide annual positive payment updates for all physicians for four years; (3) ensure access to preventative care, care coordination, and primary care services through increased payment updates for those services; (4) aggressively test and evaluate new payment and delivery models; (5) stabilize payment rates for providers who demonstrate a commitment to quality and efficiency within a fee-for-service model; and (6) ensure long term stability in the Medicare physician payment system through predictable updates accurately reflecting the cost and value of providing health care services in coordinated care models. The cost to repeal the SGR formula had been estimated at $300 billion over ten years. However, the Congressional Budget Office recently lowered the estimate to $138 billion based on lower than expected growth in Medicare physician spending. The American Association of Colleges of Osteopathic Medicine, the American Academy of Family Physicians, Premier Healthcare Alliance and the Association of American Medical Colleges supports the legislation. The bill has been referred to the House Committee on Energy and Commerce and the House Committee on Ways and Means. Similar bills have been introduced in prior legislative sessions, but they remained in committee and did not receive floor consideration.