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Government Relations Update – February 18, 2014

Pennsylvania Issues


State Budget: On February 4, 2014, Governor Tom Corbett (R) delivered his 2014-2015 state budget address to the General Assembly. The $29.4 billion plan represents a 3.3% spending increase compared to the current budget. The plan relies on projected revenue growth, reduced pension contributions and yet-unapproved changes to the state Medicaid program to provide for the increase in spending. The budget proposal also includes several one-time revenue sources such as new oil and gas leases on state forest lands, a reduced holding time for unclaimed property before being claimed by the Commonwealth and a $225 million transfer of private equity investments and cash reserves from the tobacco settlement fund to the Public School Employees' Retirement System for a partial pension payment.

Following the budget address, the Hospital & Healthsystem Association of Pennsylvania (HAP) issued a statement largely supporting the Governor's proposal. HAP praised the Governor for maintaining state funding for critical care hospitals, obstetrical and neonatal care and burn centers. HAP did express concern that the budget proposal failed to expand Medicaid coverage to the nearly 500,000 uninsured Pennsylvanians. The Pennsylvania Medical Society also supported the proposal since it includes increased funding for medical student loan forgiveness and funding for 12 new residency slots for medical school graduates. The legislature will conduct budget hearings over the next two months, and the proposal will be debated and modified during this time. The Governor and legislative leaders have pledged to meet the June 30th constitutional deadline for budget passage.


Pennsylvania Primary Election: The Pennsylvania primary election will be held on May 20, 2014, and Pennsylvania voters will select party candidates for United States Congress, Governor, Lieutenant Governor and representatives for the Pennsylvania House and Senate. Allentown Mayor Ed Pawlowski (D) had announced that he would seek the Democratic nomination for Pennsylvania Governor, but he withdrew his candidacy on February 3, 2014 and has pledged his support to State Treasurer Rob McCord. Candidates seeking to be included in the primary will begin circulating nomination petitions on February 18th and will have until March 11th to file. Individuals who wish to vote in the primary must register by April 21, 2014.

New Jersey Issues


S. 792: Breast Density Notification Law. On January 22, 2014, Governor Chris Christie (R) signed into law a bill requiring mammography providers to notify women with dense breast tissue of their condition and the associated risks. The bill also requires that insurers cover supplementary breast screenings for women with dense breast tissue, such as ultrasound, MRI or tomosynthesis. Supporters of the legislation assert that women with dense breast tissue have a higher rate of breast cancer. However, the American College of Radiology and the American Cancer Society argue that assessment of breast density is subjective and that there is no consensus whether it warrants additional screening. Pennsylvania passed similar legislation in 2013. New Jersey has become the 14th state to enact breast density notification legislation. Only two other states, Connecticut and Illinois, require that insurers cover supplemental screenings. Senator Michael Doherty (R-Warren, Hunterdon, Somerset) and Assemblymen Erik Peterson (R-Warren, Hunterdon) and John DiMaio (R-Warren, Hunterdon) abstained from voting on the bill, which takes effect on May 1, 2014.

Federal Issues


Sustainable Growth Rate: The Sustainable Growth Rate (SGR) formula was devised to control healthcare spending by tying Medicare costs to the growth in the economy. As medical costs increased more quickly than inflation, the SGR formula would have caused physician payment reductions every year since 2002. In response, Congress has passed several bills to delay implementation of the payment reductions. The current Medicare physician fee schedule will expire on March 31, 2014. Unless Congress acts, physician payments through Medicare will be reduced by 24.4%.

On December 12, 2013, the Senate Finance Committee, the House Energy & Commerce Committee and the House Ways and Means Committee approved bills to permanently repeal the SGR and replace it with a new formula for physician payments through Medicare. On February 6, 2014, House and Senate committee leaders agreed to a proposal to reconcile the bills. Specifically, the proposal would: (1) repeal SGR; (2) provide a 0.5% annual physician payment increase for five years; (3) consolidate three existing quality programs that reward value over volume; (4) encourage alternative payment models (APM) by providing a 5% bonus to providers who receive a significant portion of their revenue from an APR or patient centered medical home; and (5) increase transparency and quality improvements by expanding the use of Medicare data.

The proposal does not address expiring Medicare extender provisions, including the Medicare Dependent Hospital (MDH) program, which were part of the Senate Finance Committee plan. In addition, lawmakers have not provided details regarding how the proposal, which is estimated to cost $130 billion over 10 years, will be funded. HAP and the American Hospital Association (AHA) are in the process of evaluating the SGR proposal and will be advocating for the inclusion of Medicare extenders into the final bill.

Hospital Observation Status: As reported previously, the final 2014 federal fiscal year Medicare inpatient prospective payment system rule established new criteria for determining the appropriateness of inpatient admissions. In general, the Centers for Medicare & Medicaid Services (CMS) will presume that surgical procedures, diagnostic tests and other treatments provided in a hospital are appropriate for Medicare Part A inpatient hospital payments when a physician admits a patient based on the expectation that the patient will require a stay extending through at least two midnights. Following significant concern from hospitals and lawmakers, CMS gave hospitals a reprieve until March 31, 2014 to comply with the new policy. On January 31, 2013, CMS announced that the delay would continue until September 30, 2014. HAP and the AHA are pleased with the delay, but urged CMS to find a solution that reimburses hospitals for reasonable and necessary inpatient-level services provided to Medicare beneficiaries that are not expected to be admitted for two midnights.

Federal Borrowing Limit: As previously reported, on October 17, 2013, President Obama (D) signed into law a bill to raise the federal borrowing limit until February 27, 2014. Conservative members of Congress originally insisted that any further increase in the debt limit would need to include deficit reduction provisions. However, on February 15, 2014, President Obama signed into law a bill to raise the borrowing limit until March 15, 2015 without deficit reduction requirements. Congressmen Dent (R-15-PA), Fitzpatrick (R-8-PA) and Cartwright (D-17-PA) and Senators Booker (D-NJ), Menendez (D-NJ) and Casey (D-PA) voted in favor of the measure. Congressman Lance (R-7-NJ) and Senator Toomey (R-PA) opposed it.