Government Relations Update – November 1, 2011

Pennsylvania Issues

Advocacy

• medicaid Shortfalls:  Since October 1, 2008, the American Recovery and Reinvestment Act (ARRA) has provided more than $90 billion in federal funding to assist states struggling to pay for their portion of medicaid services.  Most significantly, the ARRA included enhanced Federal medicaid Assistance Percentage (FMAP) funding, which increased the federal portion and decreased the state portion of medicaid funding requirements by about 6% annually.  However, the FMAP funding assistance expired on June 30, 2011, and state officials in Pennsylvania , New Jersey and in many other states across the country anticipate that their medicaid programs will now face a budget shortfall as a result.  medicaid spending represented about 30% of the Commonwealth’s total budget and nearly 25% of New Jersey ’s state’s budget in 2010. 
  
  Although states are forbidden from changing the eligibility rules for medicaid recipients, states have threatened to reduce payment rates to doctors and hospitals, increase co-payments, and eliminate program benefits to compensate.  In response, Hospital organizations have expressed concern that medicaid payment reductions will lead to reduced access for poor and disabled patients.  On February 3, 2011, Kathleen Sebelius, Secretary of the United States Department of Health and Human Services (HHS), delivered a letter to each Governor suggesting that states modify certain optional services, better manage care for high cost enrollees and aggressively combat fraud in order to prepare for the adverse FMAP changes.   Governors Christie and Corbett joined other Republican Governors by sending a letter to President Obama in June requesting permission to change medicaid eligibility requirements in an attempt to lower costs.    

Legislation

• H.B. 1570:  The Health Care Facilities Act.   On May 23, 2011, Representative Doug Reichley (R-Berks, Lehigh) introduced legislation intended to limit the number of new ambulatory surgical facilities (ASFs) created in Pennsylvania through the implementation of stringent accreditation and licensing requirements.  The legislation would require that a new ASF obtain accreditation by a nationally recognized accrediting organization in order to provide ambulatory surgery services.  In addition, ASFs would not be able to perform procedures: (1) exceeding four hours of operating time and/or four hours of recovery time; (2) requiring more than local or regional anesthesia; (3) associated with the risk of extreme blood loss; or (4) directly involving major blood vessels.  Each facility would also be required to submit periodically a list of operative procedures performed, the type of anesthetic used and a current accreditation survey.  Licensing for certain services would also be limited for quality reasons based on insufficient volumes or utilization. 
  
  On October 20, 2011, the Pennsylvania House Health Committee held a hearing on the bill, and the Hospital Association of Pennsylvania (HAP) testified in support.  HAP asserts that the legislation would reduce redundancy of services and properly regulate services provided within these facilities.  Representative Reichley introduced similar legislation in the prior session, but it was not considered before the session concluded.  Representatives Clymer (R-Bucks) and Harhart (R-Lehigh, Northampton ) serve as co-sponsors. 
• S.B. 1099:  Employee Overtime.  The Pennsylvania Minimum Wage Act (PMWA) requires that employers pay overtime at a rate of 1½ times the rate of pay after 40 hours of work for covered employees.  Many hospitals, nursing homes and similar employers throughout the country have elected to pay their employees pursuant to an “8 and 80” overtime rule, under which employees are paid overtime for all hours worked in excess of eight in a single day and all hours worked in excess of 80 in a two week period.   Section 7(j) of the Federal Fair Labor Standards Act (FLSA) specifically allows this practice for hospitals.  A March 2010 decision by a judge in the Philadelphia Court of Common Pleas has called that practice into question.  In an attempt to clarify the issue, Senator Vance (R-Cumberland) on June 3, 2011 introduced legislation to amend the PMWA by specifically permitting employers to utilize the overtime arrangement described in Section 7(j) of the FLSA.  On October 18, 2011, the Senate Labor and Industry Committee approved the bill, which now proceeds to the Senate for consideration.  HAP assisted in the development of the bill and supports it. 

Federal Issues

Advocacy

• Patient Protection and Affordable Care Act (PPACA):  The Patient Protection and Affordable Care Act of 2010 (PPACA) includes the Community Living Assistance Services and Support Act (CLASS), which is intended to provide long-term care insurance for individuals with qualifying disabilities limiting daily living. According to PPACA, regulations for the CLASS Act must be issued by the Secretary of HHS no later than October 1, 2012.  These regulations are expected to specify the method of operation of the program, the premiums for each population group, how people will qualify for and obtain benefits, how decisions can be appealed and a host of other program details. 
  
  As a condition to implementation of the CLASS Act programs, the Secretary of HHS must provide Congress with a forecast assuring that these programs would remain solvent for at least 75 years.  On October 14, 2011, HHS informed Congress that it could not assure solvency and requested that implementation be suspended.  Critics of PPACA used this as an opportunity to demand repeal of the CLASS Act altogether.   Congress has scheduled several hearings to consider these demands.
• Centers for medicare & medicaid (CMS) Regulatory Reforms:  On January 18, 2011, President Obama issued an executive order entitled “Improving Regulation and Regulatory Review.”  The executive order requires federal agencies to review existing regulations that may be outmoded, ineffective, insufficient, or excessively burdensome and to propose appropriate modifications.  On October 18, 2011, the Centers for medicare & medicaid Services (CMS) published one final and two proposed rules in response to the executive order.  
  
  The final rule provides flexibility in the timing of the provision of notice of patient’s rights that enables Ambulatory Surgical Centers (ASCs) to perform surgeries on the same day that a patient is referred for or presents at the ASC for an ASC service.  The first proposed rule revises certain medicare Conditions of Participation in a manner intended to allow flexibility, reduce regulatory burden and improve clarity in health care regulation.  For example, one proposed change would allow multihospital systems to have one governing board to provide complete oversight across all hospitals, thus easing hospital operation requirements and allowing governing body oversight to function in a more efficient and effective manner. 
  
  The second proposed rule would make fourteen specific reforms to existing medicare regulations in order to improve efficiency, improve transparency and reduce regulatory burdens, including revising regulations for end-stage renal disease to remove unnecessary and duplicative life safety code requirements.  Overall, the final rule and the two proposed rules appear to make significant progress in eliminating duplicative and unnecessary requirements, while providing hospitals and other providers with greater control over how to best achieve patient health care objectives.
• National Deficit Reduction Plan:  As previously reported, Congress passed the much anticipated debt ceiling relief bill on August 2, 2011, which will raise the nation’s debt ceiling in several steps until 2013 and reduce the federal budget by about $2.1 trillion over the next ten years.  The first stage of the bill requires $917 billion in federal spending reductions over the next ten years in exchange for a $900 billion increase in the national debt ceiling.  The second stage of the bill requires a special joint committee of Congress to recommend by late November an additional $1.2 trillion to $1.5 trillion in additional spending cuts to be implemented over ten years.  If the committee’s recommendations are enacted by late December, then the debt ceiling can be raised by an amount equal to the spending cuts.  If the committee’s recommendations are not enacted, then the debt ceiling will increase by $1.2 trillion, and $1.2 trillion in mandatory spending reductions - evenly divided between defense and non-defense spending - will be implemented, too. 
  
  Special interest groups continue to lobbying Congress to protect their programs.  Premier, the American Hospital Association and other hospital organizations have launched a vigorous advocacy campaign designed to oppose further hospital payment reductions.   Hospital leaders recognize that modifications to medicare and medicaid may be inevitable, but the goal is to minimize any adverse impact from the committee proposal.