Government Relations Update – April 5, 2011

State Issues

Legislation

• S.B. 792: On March 9, 2011, Senator Brubaker (R- Chester, Lancaster) introduced legislation to temporarily suspend the Pennsylvania Prevailing Wage Act from June 30, 2011 through July 1, 2015. The Pennsylvania Prevailing Wage 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. Senator Brubaker estimates that the suspension would provide an incentive for the commencement of new construction projects, since removing the prevailing wage requirement would reduce labor costs by up to 25%. Union representatives have planned rallies to oppose the bill. Senator Mensch (R-Bucks, Lehigh, Montgomery, Northampton) serves as a co-sponsor of the bill. The bill has been assigned to the Senate Labor and Industry Committee.
• S.B. 902: Medical Care Availability and Reduction of Error (Mcare) Act. On March 25, 2011, Senator Ward (R-Westmoreland) introduced a proposed amendment to the Mcare Act to reduce the aggregate amount of Mcare assessments payable by providers by the Mcare Fund balance existing at the end of the prior year. As previously reported, the Commonwealth transferred $100 million from the Mcare Fund to the General Purpose Fund in order to balance the 2009-2010 state budget, leading to separate lawsuits by the Pennsylvania Medical Society and the Hospital Association of Pennsylvania (HAP) against the Rendell Administration. Senator Ward's proposed amendment would prevent future surpluses from accumulating in the Mcare Fund and thus remove the risk that future Mcare assessments would be used to balance the budget. Senator Browne (R-Lehigh, Monroe, Northampton) serves as a co-sponsor of the bill, which has been referred to the Senate Banking and Insurance Committee. HAP supports the bill.
• S.B. 848: Nurse-to-Patient Staffing Ratios. On March 28, 2011, Senator Solobay (D-Washington) reintroduced legislation which would require certain nurse-to-patient staffing ratios in various units of Pennsylvania hospitals. The bill would require hospital compliance to ensure initial and continued hospital licensure by the Department of Health. Senator Solobay asserts that higher staffing levels would result in fewer hospital acquired infections, improved care, and shorter hospital stays. 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. The Senator introduced a similar bill in the previous legislative session, but it remained in committee and did not receive floor consideration. The bill has been referred to the Senate Public Health and Welfare Committee.

Federal Issues

Advocacy

• Accountable Care Organizations: On March 31, 2011, the Centers for Medicare & Medicaid Services (CMS) released its highly anticipated proposed rule regarding Accountable Care Organizations (ACO) under the Patient Protection and Affordable Care Act (PPACA). The proposed rule would establish a program designed to foster collaboration between hospitals, physicians and other providers for the treatment of a defined group of Medicare and Medicaid beneficiaries, with the aim of improving outcomes and reducing costs. Under the proposed rule, an ACO that meets established quality and performance standards and surpasses a minimum savings target would receive a percentage of savings (in additional to traditional fee-for-service payments).

  The proposed rule addresses numerous policy and operational issues associated with the entities that may form an ACO, beneficiary assignment to an ACO, establishment of quality standards, and calculation of incentive payments, among many others items. Comments on the proposed rule are due by June 6th. CMS expects to publish the final rule by the end of the year and anticipates that the program will begin operating on January 1, 2012.

  The 429-page proposed rule is still being reviewed and future updates will be provided.

  Also on March 31, 2011: (1) CMS and the Office of Inspector General (OIG) jointly issued a notice with comment period discussing the waiver of the Stark Law, the anti-kickback statute, and certain provisions of the civil monetary penalty law in connection with the ACO program; (2) the Federal Trade Commission (FTC) and the Department of Justice (DOJ) jointly issued an Antitrust Policy Statement titled, "Proposed Statement of Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program"; and (3) the Internal Revenue Service (IRS) issued a notice requesting comments regarding the need for guidance on participation by tax-exempt organizations in ACOs.

• Physician Owned Hospitals: As previously reported, PPACA severely limited the development of new physician owned hospitals by eliminating the applicable exception to the Stark Law for physician ownership of hospitals. PPACA does permit, with significant restrictions, any licensed hospital which had physician investors and a Medicare provider agreement in effect as of March 23, 2010 to continue to qualify for the Stark whole-hospital exception. However, the percent of physician ownership or investment in a hospital may not be increased at any time after March 23, 2010, and the number of operating rooms, procedure rooms and beds for which a hospital is licensed may not be increased at any time after March 23, 2010, except pursuant to a few narrow exceptions.

  The Physician Hospitals of America (PHA) recently filed a Federal lawsuit seeking to have the PPACA limitations on physician owned hospitals declared unconstitutional. In addition, two bills have been introduced in Congress that would repeal the PPACA restrictions on physician owned hospitals. Both bills have been assigned to the Ways and Means Committee and the Energy and Commerce Committee. The American Hospital Association (AHA) has not commented on either bill, but the AHA has historically supported limitations on physician owned hospitals.

• Medical Device Tax: PPACA imposes a 2.3% sales tax on medical devices effective on December 31, 2012. On March 28, 2011, the Health Industry Group Purchasing Association (HIGPA), the AHA, the Catholic Health Association and the Federation of American Hospitals sent a letter to the IRS requesting assurances that the medical device excise tax will not passed on to hospitals by medical device manufacturers. The letter states that hospitals are already making substantial contributions to PPACA through the estimated $155 billion reduction in Medicare payments to hospitals and that medical device manufacturers should not be permitted to add to the burden.

  Senator Toomey (R-PA) and Congressman Dent (R-15) are both co-sponsors of legislation that has been introduced to repeal the medical device tax. They assert that the tax will cost Pennsylvania's economy $100 million per year, causing severe job losses and preventing growth.