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Government Relations Update – July 9, 2013

Pennsylvania Issues


H.B. 1437(Act 1A of 2013): General Fund Act. On June 30, 2013, Governor Tom Corbett (PA-R) approved the Commonwealth's 2013-2014 state budget. The budget authorizes $28.3 billion in spending, which represents a 2.3% spending increase compared to the prior fiscal year, but it includes $65 million less in spending than the Governor originally proposed in February. The budget includes slight increases compared to the prior fiscal year in funding to Medical Assistance hospital supplemental payments for obstetrics and neonatal services, hospital based burn centers, critical access hospitals and trauma centers. However, state funding levels to St. Luke's should remain relatively unchanged. Every Republican legislator supported the budget. Six Democrats in the Senate also voted for the budget, including Senator Lisa Boscola (D-Lehigh, Monroe, Northampton).

H.B. 1190: Hospital Licensure. As previously reported, Representative Bryan Cutler (R-Lancaster) introduced legislation to exempt accredited hospitals from routine licensure renewal surveys conducted by the Pennsylvania Department of Health (DOH). The bill requires the DOH to recognize reports from national accrediting organizations as acceptable for meeting licensure requirements, as long as the accrediting organization's standards are equal to or more stringent than those of the DOH. Hospitals not meeting accreditation criteria would still be subject to the current licensing requirements of the DOH. In addition, the DOH would maintain full authority to inspect a hospital based on patient complaints. On May 6, 2013, the House passed the bill unanimously, and it was unanimously approved by the Senate on June 30, 2013. The bill has been sent to the Governor for his signature.

S.B. 379: Apology/Benevolent Gesture Act. On January 31, 2013, Senator Pat Vance (R-Cumberland, York) reintroduced legislation that would make an apology by a healthcare provider or healthcare employee inadmissible in any subsequent medical malpractice action. Thirty five states, including Ohio, Delaware and Maryland, have passed similar legislation with the goal of encouraging communications between patients and providers and reducing the number of medical malpractice cases. The bill protects benevolent gestures, but admissions of negligence or fault are not protected. The Senate unanimously approved the bill on June 25, 2013, and it has been sent to the House for consideration. Senators Boscola, Browne (R-Lehigh, Monroe, Northampton), and Mensch (R-Bucks, Lehigh, Montgomery, Northampton) serve as co-sponsors. The Hospital & Healthsystem Association of Pennsylvania (HAP) and the Pennsylvania Medical Society support the bill, despite its significant limitations.


Medical Assistance Modernization Act of 2013: 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 generated $339 million for the Commonwealth's General Fund and $1.4 billion to Pennsylvania hospitals through June 30, 2013. The tax assessment rate imposed under Act 49 increased from 2.9% for the state fiscal year ending June 30, 2011 to 3.22% for the state fiscal year ending June 30, 2012. The rate remained at 3.22% for the state fiscal year ending June 30, 2013. Governor Corbett's budget anticipated that Act 49 will be reauthorized, but will transfer $150 million to support the General Fund in each of the next two state fiscal years, thereby further decreasing hospital distributions. HAP is in the process of recalculating hospital specific data for members and will issue an impact estimate when complete.

City Revitalization and Improvement Zone (CRIZ) Program: The 2013-2014 state budget also includes a new law establishing the City Revitalization and Improvement Zone (CRIZ) program. The CRIZ program, which is similar to the City of Allentown's Neighborhood Improvement Zone (NIZ), creates a special taxing district to revitalize underdeveloped and blighted properties. Third Class Cities with populations of at least 30,000 are eligible for the program. Two cities will be selected each year by the Governor's Budget Office, the Department of Revenue and the Department of Community and Economic Development (DCED). The City of Bethlehem has a population of 74,982 and plans to file an application. The other Third Class Cities eligible for the CRIZ program include Erie, Reading, Lancaster, Altoona, York, Wilkes-Barre, and Chester. Harrisburg has a population of 49,000, but was excluded from the program since the city is considered financially distressed by DCED and is in receivership.

New Jersey Issues


State Budget: On June 28, 2013, Governor Chris Christie (R-NJ) signed the New Jersey 2013-2014 state budget into law. The $32.9 billion budget increases spending by 2.3% from the previous fiscal year without adding new taxes. Governor Christie previously authorized the expansion of the Medicaid program beginning January 1, 2014 to all low-income residents making up to 133% of the federal poverty level. New Jersey will receive 100% of the federal matching funds for new enrollees for the first three years and then experience a phase down to 90%. The Governor projects saving approximately $227 million and covering an additional 100,000 lives during the first six months of the expansion.

Federal Issues


Dialysis Payment Reduction: On July 1, 2013, the Centers for Medicare & Medicaid Services (CMS) proposed reducing payments to dialysis facilities under the end-stage renal disease (ESRD) prospective payment system by 9.4% for services delivered on or after January 1, 2014. According to the Government Accountability Office (GAO), CMS spent $10.1 billion on 365,000 ESRD beneficiaries in 2011. The Congressional Budget Office projects that Medicare will save $4.9 billion over 10 years as a result of the proposed payment reductions. The National Kidney Foundation (NKF) asserts that the proposal is too aggressive and will negatively impact or limit patient care, since the aggregate Medicare profit margin for dialysis services is only about 4%. The proposal is open to public comment until August 30, 2013, and a final ruling is expected later this calendar year.

Affordable Care Act Employer Mandate: The Patient Protection and Affordable Care Act (PPACA) requires that companies with more than 50 full-time employees must offer a minimum standard of employee health insurance coverage or pay a $2,000 penalty per employee. The requirement was initially scheduled to become effective on January 1, 2014. On July 2, 2013, the Obama Administration announced that it was postponing the requirement for one year in response to concerns about the complexity of the regulations. The delay does not modify the timeframe for the individual mandate, which requires most Americans to purchase health insurance coverage by January 1, 2014 or pay a penalty. Other key components of the law, including the introduction of health insurance exchanges, are schedule to commence on October 1, 2013.