Government Relations Update – February 5, 2013

Pennsylvania Issues

Legislation

Institutions of Purely Public Charity Act (Act 55 of 1997): The Pennsylvania Constitution provides that “institution[s] of a purely public charity” are entitled to exemption from real estate taxes. In 1985, the Pennsylvania Supreme Court adopted a test (HUP Test) to determine that an institution is one of purely public charity when it: (a) advances a charitable purpose; (b) donates or renders gratuitously a substantial portion of its services; (c) benefits a substantial and indefinite class of persons who are legitimate subjects of charity; (d) relieves the government of some of its burden; and (e) operates entirely free from private profit motive. In 1997, the Pennsylvania General Assembly enacted the Institutions of Purely Public Charity Act (Act 55), which clarified part (d) of the HUP Test by defining broadly the requirement to relieve the government of some of its burden. On April 25, 2012, the Pennsylvania Supreme Court revisited the HUP Test in a tax exemption appeal. The court determined that a party must meet the HUP Test to be eligible for tax exemption, and, if it fails to do so, the applicant’s ability to comply with Act 55 is meaningless. As a result, applicants for tax exemption can no longer rely on the certainty and flexibility created by Act 55. Senators Brubaker (R-Lititz) and Scarnati (R-Jefferson) recently announced plans to reintroduce legislation to amend the Pennsylvania Constitution and preserve the General Assembly’s role in determining whether an institution is a purely public charity. Senators Brubaker and Scarnati introduced similar legislation during the previous legislative session. Although it passed in the Senate, the House failed to act on the bill before the session ended. The Hospital & Healthsystem Association of Pennsylvania (HAP) supports the proposed legislation.

Miscellaneous

Bethlehem Mayoral Candidates: On January 27, 2013, Bethlehem City Councilman Bob Donchez (D) announced his candidacy for Mayor of Bethlehem. Councilman Donchez currently serves as the District Chief of Staff for State Representative Dan McNeill (D-Lehigh, Northampton). He has been a member of Bethlehem City Council since 1996 and has served two terms as Council President. Councilman Donchez is a retired high school teacher. Bethlehem City Councilman J. William Reynolds (D) also announced his candidacy for Mayor. Councilman Reynolds was first elected to Bethlehem City Council in 2007. The City of Bethlehem limits its mayors to two consecutive four-year terms, and Mayor John Callahan (D) is completing his second four-year term. There are currently no Republican candidates for the office.

Department of Health Acting Secretary: On January 29, 2013, Department of Health (DOH) Acting Secretary Michael Wolf toured St. Luke’s Health Center – McAdoo. Acting Secretary Wolf announced during the tour that Governor Tom Corbett (R) plans to include $5 million in his proposed 2013-2014 state budget to support community based health care clinics located in rural and underserved areas throughout Pennsylvania. As previously reported, the Governor intends to introduce his proposed 2013-2014 state budget on February 5, 2013.

Governor Corbett Visit: On January 31, 2013, Governor Corbett toured St. Luke’s Hospital – Anderson Campus as part of a visit promoting economic growth in the Lehigh Valley. The Governor met with Joel Fagerstrom, Jane George, Bob Martin, Ed Nawrocki, Robby Wax and Mark Zolfaghari to discuss relevant issues relating to the Patient Protection and Affordable Care Act (PPACA) and the current medical malpractice environment. Nawrocki provided a tour of the hospital, including an overview of the Network’s investment in the facility and road infrastructure. Nawrocki also discussed the emergency department and fourth floor expansion projects at the hospital.

New Jersey Issues

Legislation

A-3043: Transforming Idle Hospitals. On January 28, 2013, the New Jersey Assembly passed legislation providing corporate tax credits to developers to repurpose ailing or obsolete hospitals. The bill allows a developer to qualify for corporation business tax credits equal to any capital investment exceeding $10 million applied towards repurposing a former hospital facility for commercial use resulting in 100 or more full time employed occupants. Supporters of the legislation assert that the legislation would increase employment and local tax revenue. However, the New Jersey Office of Legislative Services (OLS) is unable to determine the fiscal net impact to New Jersey, since the number of hospitals eligible for repurposing is unknown. Assemblymen John DiMaio (R-Warren, Hunterdon) and Erik Peterson (R-Warren, Hunterdon) both voted against the bill. The bill has been sent to the Senate for consideration and has been referred to the Economic Growth Committee. The New Jersey Hospital Association (NJHA) strongly supports the bill.

Assembly Concurrent Resolution (ACR)-170: As part of its decision concerning the constitutionality of PPACA, the United States Supreme Court opined that each state must individually decide whether to expand Medicaid coverage as contemplated by PPACA. Unless states opt out, Medicaid will expand significantly on January 1, 2014. The federal government will match additional state funding for the first three years following the expansion and then gradually reduce the matching rate to 90% by 2020. On January 28, 2013, the New Jersey Assembly passed a resolution urging Governor Chris Christie (R) to support expansion of the New Jersey Medicaid program. Assemblymen John DiMaio (R-Warren, Hunterdon) and Erik Peterson (R-Warren, Hunterdon) both voted against the resolution. A similar resolution was passed by the Senate on November 29, 2012. Senator Michael Doherty (R-Warren, Hunterdon) opposed the resolution. Governor Christie does not support the expansion, since it would cost New Jersey nearly $1.5 billion over 10 years. NJHA supports the expansion.

Federal Issues

Advocacy

Durable Medical Equiptment (DME) Bidding Program: On January 30, 2013, the Centers for Medicare and Medicaid Services (CMS) announced new prices for durable medical equipment and supplies under Round 2 of its expanded Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) competitive-bidding program. The program, which was established by the Medicare Modernization Act in 2003, will expand to 91 major metropolitan areas on July 1, 2013 and add new product categories and a mail-order competition for diabetic testing supplies. CMS reported that the new prices are projected to save beneficiaries an average of 45% on durable medical equipment, such as walkers, wheelchairs and prosthetics. Conversely, the Pennsylvania Association of Medical Suppliers (PAMS) does not believe that the deep discounts are sustainable. PAMS Executive Director John Shirvinsky concluded, “This may well spell the destruction of an entire industry.”

Legislation

H.R. 351: Protecting Seniors’ Access to Medicare Act. On January 23, 2013, Congressman David Roe (R-1-TN) introduced legislation to eliminate the Medicare Independent Payment Advisory Board (IPAB). PPACA created IPAB as a cost-containment mechanism for Medicare. IPAB would be required to adopt cuts in healthcare spending if healthcare costs exceed a certain formula, which has drawn comparisons to the sustainable growth rate formula that has been problematic in determining the Medicare physician fee schedule. Congressman Dent (R-15-PA), Fitzpatrick (R-8-PA) and Lance (R-7-NJ) serve as co-sponsors of the legislation. The bill has been assigned to the House Ways and Means, Energy and Commerce and Rules Committees. During the previous Congress, a similar bill was passed by the House but was not considered by the Senate. The American Hospital Association (AHA), HAP and Premier support the bill.