Government Relations Update – March 5, 2013

Pennsylvania Issues

Legislation

S.B. 4: Institutions of Purely Public Charity Act. As previously reported, 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.

On February 5, 2013, Senator Mike Brubaker (R-Chester, Lancaster) introduced legislation to amend the Pennsylvania Constitution and preserve the General Assembly's role in determining whether an institution is a purely public charity. The Senate Finance Committee approved the bill on February 13, 2013, and it is currently under consideration by the Senate. Senators Argall (R-Berks, Carbon, Lehigh, Monroe, Northampton, Schuylkill), Browne (R-Lehigh, Monroe, Northampton) and Mensch (R-Bucks, Lehigh, Montgomery, Northampton) serve as co-sponsors. The Hospital & Healthsystem Association of Pennsylvania (HAP) supports the bill.

S.B. 379: Apology/Benevolent Gesture Act. On January 31, 2013, Senator Pat Vance (R-Cumberland, York) reintroduced legislation that would make an apology by a healthcare provider or healthcare employee inadmissible in any subsequent medical malpractice action. Thirty five states, including Ohio, Delaware and Maryland, have passed similar legislation with the goal of encouraging communications between patients and providers and reducing the number of medical malpractice cases. On February 5, 2013, the Senate Banking and Insurance Committee approved the bill, and it has been sent to the full Senate for consideration. Senators Boscola (D-Lehigh, Northampton, Monroe), Browne (R-Lehigh, Monroe, Northampton), and Mensch (R-Bucks, Lehigh, Montgomery, Northampton) serve as co-sponsors. HAP supports the bill.

Miscellaneous

Resignation: On February 4, 2013, Gary Alexander, Secretary for the Pennsylvania Department of Public Welfare (DPW), resigned his position to pursue private sector opportunities. Former State Representative Beverly Mackereth will serve as Acting Secretary until a permanent successor is confirmed. Ms. Mackereth is a graduate of Frostburg State University. She has served as DPW's Deputy Secretary for the Office of Children, Youth and Families since November 2011. She also previously served as the Executive Director of the York County Department of Human Services, the Executive Director of the Healthy York County Coalition with WellSpan Health System and the Deputy Director of the Governor's Community Partnership for Safe Children under former Governor Tom Ridge (R). In her new role, she will be responsible for a department that employs 17,000 workers, has a budget of more than $26 billion and serves 2.2 million low-income, elderly and disabled Pennsylvanians.

New Jersey Issues

Advocacy

State Budget: On February 26, 2013, Governor Chris Christie (R-NJ) proposed a $32.9 billion budget for the upcoming state fiscal year. The proposed budget would increase spending by 2.3% from the current fiscal year without adding new taxes. Funding for New Jersey hospitals would remain largely unchanged, although the proposal does include additional funding for teaching hospitals. The New Jersey Hospital Association (NJHA) praised the Governor's budget proposal. The New Jersey legislature will conduct budget hearings over the next several months and must adopt the final budget by July 1st, which marks the beginning of the New Jersey fiscal year.

Medicaid Expansion: The federal Medicaid program is scheduled to expand significantly on January 1, 2014 pursuant to the Patient Protection and Affordable Care Act (PPACA), unless states elect to opt out. 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. Although Governor Christie originally announced that New Jersey would not participate in the expansion, he reversed his position during his budget address on February 26, 2013. The Governor stated that about 100,000 more individuals will be covered by the expansion and that New Jersey will save nearly $227 million in the next fiscal year by participating in the expansion. Governor Christie is the eighth Republican governor to agree to expand the Medicaid program pursuant to PPACA, and New Jersey becomes the 24th state to participate. On February 5, 2013, Governor Corbett (R-PA) announced that Pennsylvania would reject the expansion plan. However, Governor Corbett recently met with Kathleen Sebelius, Secretary of the Department of Health and Human Services, and may reconsider his decision.

Federal Issues

Advocacy

Sequestration: On January 2, 2013, President Obama signed into law legislation averting for two months automatic sequestration cuts in federal spending imposed by the Budget Control Act of 2011. Since Congress was not able to reach a spending agreement, the cuts became effective on March 1, 2013 and will remain in place until Congress reaches a spending agreement. Unless Congress acts, Medicare provider payments will be reduced by more than $11 billion in federal fiscal year 2013 and $123 billion between federal fiscal year 2013 and federal fiscal year 2021. The American Hospital Association (AHA), NJHA and HAP have been meeting with lawmakers in an attempt to end the sequester cuts. However, Congress is not expected to act until summer at the earliest.

Improving Access to Medicare Coverage: On February 21, 2013, Senator Charles Schumer (D-NY) announced plans to introduce legislation to override current Medicare regulations covering post-acute care in a skilled nursing facility only if immediately prior thereto a patient has three consecutive days of hospitalization as an inpatient. As more patients are placed into observation status, their inpatient stays are reduced, thereby jeopardizing Medicare coverage for post-acute care services in skilled nursing facilities. The legislation would permit observation stays to be included in the measurement for the three consecutive days of hospitalization requirement. Former Senator John Kerry (D-MA) introduced similar legislation in 2011, but it remained in committee. HAP and Premier have not commented on the proposed legislation.