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Government Relations Update – June 25, 2013

Pennsylvania Issues


S.B. 5 (Act 10 of 2013): Community – Based Health Care (CHC) Act. On May 21, 2013, Governor Tom Corbett (R) signed into law a bill authorizing the use of $4 million to develop and expand community based health care clinics located in rural and underserved areas throughout Pennsylvania. The clinics are intended to provide uninsured patients a centralized site for medical care and create a partnership between patients, physicians, nurses and clinical staff members. Senators Dave Argall (R-Berks, Carbon, Lehigh, Monroe, Northampton), Pat Browne (R-Lehigh, Monroe, Northampton) and Bob Mensch (R-Bucks, Lehigh, Montgomery, Northampton) served as co-sponsors of the legislation. The Hospital & Healthsystem Association of Pennsylvania (HAP) supported the bill.


Medical Assistance Modernization Act of 2010: As previously reported, the Medical Assistance Modernization Act of 2010, also known as Act 49, authorizes the Pennsylvania Department of Public Welfare (DPW) to impose a statewide assessment based on net operating revenues derived from inpatient services provided by licensed acute care hospitals in Pennsylvania. HAP supported the passage of Act 49, since it serves as a mechanism for the Commonwealth to secure additional federal matching funds, which are then distributed in part to hospitals through increased medical assistance payments and retained in part by the Commonwealth in its General Fund. The Act became effective on July 1, 2010 and will generate $339 million for the Commonwealth's General Fund and $1.4 billion to Pennsylvania hospitals through June 30, 2013.

Governor Corbett's budget proposal for the state fiscal year ending June 30, 2014 anticipates that Act 49 would be reauthorized, but the Governor plans to retain between $150 million and $165 million to support the General Fund, thereby further decreasing hospital distributions. HAP and hospitals throughout Pennsylvania continue to oppose any budget proposal that includes changes to the hospital tax rate assessment or an increase to the Commonwealth's allocation in excess of $126.7 million.


Pennsylvania Primary Election: The Pennsylvania primary elections were held on May 21, 2013. Among other races, Bethlehem Mayor John Callahan (D) won the Democratic primary election for Northampton County Executive. He will face John Brown (R), who currently serves as the Mayor for the Borough of Bangor, in the general election. Current Lehigh County Commissioner Scott Ott (R) secured the Republican nomination for Lehigh County Executive and will face Tom Muller (D) in the fall. Mr. Muller currently serves as the Acting Lehigh County Executive. Bethlehem City Councilman Bob Donchez (D) secured the Democratic nomination for Mayor of Bethlehem. Mr. Donchez is expected to be the city's next mayor, since no Republican candidate entered the race.

New Jersey Issues


Imputed Rural Floor Wage Index: Medicare payments for the delivery of inpatient hospital services are made in part pursuant to a prospective payment system (PPS), which pays hospitals a fixed amount for each Medicare inpatient discharge based upon patient diagnosis and certain other factors used to classify each patient into a Diagnosis Related Group (DRG). Congress adopted an “imputed” floor in the 2005 inpatient PPS rule as a temporary three year regulatory measure to address a concern that certain hospitals in New Jersey were disadvantaged by the absence of rural hospitals to set a wage index floor for purposes of determining the PPS payments to those hospitals. The imputed floor policy only benefits New Jersey hospitals, which raises the risk that the Centers for Medicare and Medicaid Services (CMS) will change or eliminate the funding mechanism. The imputed floor was originally set to expire in 2007, but it has since been extended through September 30, 2013. St. Luke's administrators met with Congressman Leonard Lance (R-7-NJ) on April 4, 2013 and asked him to support an extension to the imputed rural floor wage index. On June 14, 2013, the entire New Jersey Congressional delegation, including Congressman Lance, sent a letter to CMS seeking an extension to the imputed rural floor wage index until September 30, 2014.


Senator Frank Lautenberg: On June 3, 2013, Senator Frank Lautenberg (D-NJ) passed away after complications from viral pneumonia. Senator Lautenberg was the Senate's oldest member and last surviving veteran of World War II. Governor Chris Christie (R-NJ) had the option to appoint a successor to serve the remainder of the Senator's term through January 2015 or to call a special election. The Governor decided to schedule a special election on October 16, 2013, with a primary election to be held on August 13, 2013. Newark Mayor Cory Booker, State Assembly Speaker Sheila Oliver and Congressmen Rush Holt and Frank Pallone are all seeking the Democratic nomination. Former Borough of Bogota Mayor Steve Lonegan and Dr. Alieta Eck, a private practice physician from Piscataway, are the two Republican contenders. Governor Christie has appointed New Jersey Attorney General Jeffrey Chiesa as the interim Senator to serve until the election.

Federal Issues


Medicare Payment Advisory Commission (MedPAC) Recommendation: MedPAC is an independent Congressional agency established by the Balanced Budget Act of 1997 to advise Congress on issues affecting the Medicare program. Congress is not obligated to accept guidance from MedPAC. However, CMS and Congress frequently consider and adopt the recommendations.

Medicare currently pays significantly more for services provided in a hospital outpatient setting compared to similar services provided in a physician office. On June 14, 2013, MedPAC issued a recommendation that Medicare immediately reduce payments for services provided in a hospital outpatient setting to reflect the payment rate for similar services provided in a physician office, which would save the Medicare program about $1.8 billion per year. MedPAC asserts that the payment disparities have created incentives for hospitals to purchase physician practices and move services from physician offices to hospital outpatient settings to maximize payments, which thereby increases costs attributable to Medicare. The American Hospital Association (AHA) opposes the recommendation. According to the AHA, the change would reduce hospital Medicare revenue by 5% annually and significantly increase losses incurred by hospitals for Medicare outpatient services. The AHA also argues that hospitals incur additional costs inapplicable to physician offices and are subject to cumbersome and costly regulations, so the payment rates should not be the same.