Government Relations Update – December 13, 2011

Pennsylvania Issues

Advocacy

• State False Claims Act:  On December 6, 2011, Representative Mike Gerber (D-Montgomery) announced his plan to reintroduce a state false claims law.  Representative Gerber introduced similar legislation in prior legislative sessions.  The proposed bill would mirror the federal false claims act, which creates an incentive for individual whistleblowers and their lawyers to file lawsuits on behalf of the government for alleged fraud.  According to Representative Gerber, his bill would provide Pennsylvania with an additional source of revenue, protect whistleblowers and dissuade wrongdoers.  In response, the Hospital Association of Pennsylvania (HAP) asserts that the amendment is duplicative and unnecessary.  The Governor opposed the proposal during his tenure as Attorney General, stating that it would cost the Commonwealth significant funds for additional staff and overburden the courts. 

Legislation

• H.B. 2052:  Resolving Health Care Contract Disputes.  On December 9, 2011, Representative Randy Vulakovich (R-Allegheny) introduced legislation to address contract disputes between health care insurers and hospitals.  The proposed bill would require that, if a contracting party desires to terminate a provider contract or permit a provider contract to expire at the conclusion of a contract term, the party must provide at least ninety days notice to the other party and to the Department of Insurance.  Failure to provide notice would result in the automatic extension of the provider contract for one year on the same terms and conditions.  Upon receipt of the notice, the Department of Insurance and the Department of Health would have the right to hold public hearings to analyze the impact of termination or expiration of the contract.  The Department of Insurance would have the right to require mediation between the parties.  If the parties were unable to agree on renewal terms, the Department of Insurance could require resolution of the dispute through arbitration.  Representative Vulakovich introduced the legislation in response to the highly publicized contract dispute between the University of Pittsburgh dical Center and Highmark Blue Cross Blue Shield.  The proposed legislation has been assigned to the House Committee on Insurance and is scheduled for consideration this week.  Representatives Day (R-Berks, Lehigh) and Simmons (R-Lehigh, Northampton ) are members of the House Insurance Committee.  HAP is reviewing the bill.

Miscellaneous

• State Tax Revenues:  Pennsylvania revenues continue to lag behind the state budget.  Pennsylvania collected $1.72 billion in General Fund revenue in November, which was $63.3 million, or 3.5%, less than projected.  Likewise, fiscal year-to-date General Fund collections are 3.6% below budget.  While sales tax collections are slightly higher than expected, the Commonwealth’s two other major revenue sources - personal income taxes and corporate taxes - are significantly below budget.  A spokesperson for the Governor stated that the administration is considering budgetary freezes until the end of the state fiscal year.  Senate Appropriations Committee Chairman Jake Corman, (R-Centre) agreed that freezes may be necessary.

• Representative Mann Transition:  On November 28, 2011, Representative Jennifer Mann (D-Lehigh) announced that she would not seek reelection in 2012.   Representative Mann was first elected to the House in 1998, succeeding Charlie Dent (R) following his election to the State Senate.  She is serving her seventh consecutive term in the Pennsylvania House of Representatives and currently serves as the House Democratic Caucus secretary.  Representative Mann is only the third woman to serve in Democratic leadership in the 329-year history of the Pennsylvania General Assembly.  Allentown City Councilman Mike Schlossberg (D), a former aide to Representative Mann, intends to run for the seat.  Allentown City Councilman Julio Guridy has also expressed interest.   Representative Mann has not announced her plans following completion of her term. 

New Jersey Issues

Miscellaneous

• Wage Index Extenders:  dicare reimburses hospitals based on national payment rates adjusted by a wage index to reflect local labor costs.  A wage index is calculated for each metropolitan statistical area (MSA) and each rural area in a state.  Reimbursement is based on the cost of labor in the MSA in which a provider is located.  Section 508 of the dicare Modernization Act of 2003 permits qualifying hospitals to reclassify into adjoining areas with higher payment rates.  Warren Hospital was one of 121 hospitals in 24 states granted reclassification pursuant to Section 508.   The dicare Modernization Act provided that the reclassifications would only continue through 2007, although Congress has annually extended the provisions permitting reclassifications five times.  The most recent extension expired on September 30, 2011.  Without legislative action prior to January 1, 2012, the Section 508 reclassifications will cease, and Warren Hospital will experience an estimated annual dicare payment reduction of $2,500,000.  Congressman Scott Garrett (NJ-5-R) has joined 18 members of Congress requesting another extension of the dicare Modernization Act.

Federal Issues

Advocacy

• dicare Physician Fee Schedule:  In December 2010, President Obama signed into law a bill averting for one year the expected 25% decrease in dicare physician payments then scheduled to take effect on January 1, 2011 as a result of the sustainable growth rate (SGR) formula.  Unless Congress acts or corrects the formula, physicians will experience a 27.4% decrease in dicare payments on January 1, 2012.  St. Luke’s Physicians Group will experience an annual payment reduction of approximately $7.4 million.
  
  Congress is currently considering either a one year or a two year solution with a 1% annual physician payment increase, which would cost the federal government $20.6 billion and $38.6 billion in calendar years 2012 and 2013, respectively.  In order to pay for the solution, Congress needs to identify expense reductions in equal amounts.  mbers of Congress have suggested reducing dicare bad debt reimbursement, Health Information Exchange subsidies, payments for diagnostic imaging services and/or payments to inpatient rehabilitation hospitals.  In response, many healthcare advocates argue that hospitals should not absorb the cost to correct the flawed payment formula.
  
  The dicare Payment Advisory Commission ( dPAC) introduced a possible solution in October 2011, which some members of Congress support.  The dPAC plan would repeal the SGR formula and implement a new fee schedule for ten years.  The new fee schedule would maintain primary care payments at current rates, but reduce rates for other providers by 5.9% for three years.  Payments to specialists would then remain constant for the final seven years.  The American dical Association, Premier, HAP and other hospital and physician organizations oppose the dPAC recommendation.  Although they support abandoning the SGR formula, hospital and physician organizations assert that a new fee schedule should not include payment reductions to providers, especially given the payment reductions contemplated in the Patient Protection and Affordable Care Act of 2010 (PPACA) and the impending 2% dicare payment reduction required by the Budget Control Act of 2011. 
  
  Finally, on December 9, 2011, Congressman Dave Camp (R-4-MI) introduced legislation to delay the impact of the SGR formula for two years and instead provide a 1% annual fee increase for 2012 and 2013.  The bill would also reduce payments for hospital outpatient services, reduce dicare bad debt reimbursement and increase dicare premiums for high income beneficiaries.  HAP opposes the bill, since it would reduce dicare hospital payments by more than $21 billion annually.   House Republicans expect to pass the bill this week, although it is unclear whether it will clear the Senate.  The President has promised to veto the bill, since it contains a controversial provision to construct an oil pipeline and relaxes some environmental protection agency guidelines.