State & Federal Advocacy Update for Pennsylvania Hospitals & Health Systems September, 2011

1. State & Federal Advocacy Update forPennsylvania Hospitals & Health SystemsSeptember, 2011 Robert E. Greenwood, Vice President, Health Care Finance and Insurance The Hospital & Healthsystem Association of Pennsylvania

2. State Budget Priorities • No new taxes or broad tax (personal income or sales) increases. • Spending limit of approximately $27 billion. • Minimal use of current FY2010-11 surplus (est. $750M) of state revenues. • Support programs that encourage economic growth, job creation. • Sustain funding commitment to MA Modernization in Act 49. • Restore funds for critical access hospitals, burn and trauma centers, and OB/neonatal services. • Sustain uncompensated care funding under Tobacco Settlement.

3. FY2011-12 Medical Assistance Budget Comparison of Proposals

4. Impact of State Budget on Hospital Payments

5. State Budget, Welfare Code • Welfare Code (Act 22 of 2011)—The Governor has signed into law House Bill 960, sponsored by Rep. Mauree Gingrich (R-Lebanon). The bill contains numerous changes to the Welfare Code, including granting the Secretary of Public Welfare expanded authority to ensure the savings indicated in the state fiscal year 2011-2012 budget. Several pieces of the House Republicans’ welfare reform plan also were included. • Components of the bill impacting hospitals include: • Increasing the statewide hospital Quality Care Assessment from 2.95% to 3.22% • Changing the DPW hospital readmission requirement from 14 to 30 days. • The act also allows inmates of county or state correctional facilities who meet current MA eligibility requirements to be deemed eligible for MA benefits in order to draw down federal matching funds. Payment for care for inmates of state and county correctional facilities would be limited to Medicaid FFS rates for inpatient care and Medicare FFS rates for outpatient care. HAP objected to several sections of the bill and will be working with DPW to implement payment policy provisions impacting hospitals.

6. Health Care Bills Signed Into law • Joint and Several Liability (Act 17 of 2011)—The • Governor has signed into law Senate Bill 1131, as • amended. • The bill reforms Pennsylvania’s joint and • several liability rule by making most defendants in • civil case responsible for only their share of any damages. • HAP supported the bill.

7. HAP 2011 Fall Key Issues • Health Insurance Exchange • Health Information Technology • Overtime • Medical Liability • Mcare Fund • Apologies/Benevolent Gesture • Health Care Facilities Licensing • Other • Medicaid Managed Care • Physician Credentialing • Nurse Staffing Ratios

8. Health Insurance Exchanges • The new federal health reform provides states with • the opportunity to create health insurance exchanges • as a means of allowing individuals and small businesses • to compare qualified health insurance plans and to • purchase health insurance coverage. • Exchanges would be designed to give consumers information and provide them a simple, seamless way to enroll in a plan. • Pennsylvania lawmakers are developing legislation to create a Pennsylvania health insurance exchange that addresses the unique needs of uninsured Pennsylvanians and the state’s small employers. • Hospital and health system leaders have testified at legislative hearings about the best way to create such an exchange, and the hospital community will remain involved in these important discussions.

9. Health Information Technology • Pennsylvania needs to enact legislation to help move the • adoption and use of health information technology. • Electronic health care information exchange technology has • the potential to significantly improve the quality and efficiency • of care by allowing immediate access to critical information about a patient when health care practitioners most need it—at the point of care. • The state needs to establish a governing body to oversee the development of initiatives/projects in health information sharing. The governing body must work to make the appropriate exchange of health information a dependable and routine part of the business process for the state’s health care providers and for health programs operated by the commonwealth. • HAP has been working with the Chairman of the Senate Communications and Technology Committee, Sen. Mike Folmer (R-Lebanon), on legislation that reflects HAP’s principles related health information technology.

10. Overtime • Senator Patricia Vance (R-Cumberland) introduced • Senate Bill 1099, which removes the inconsistency • between state and federal law with respect to • calculating overtime. • Many hospitals calculate overtime pay for • employees relying on a federal waiver contained in • the Fair Labor Standards Act, which permits hospitals • to use an alternative method of calculating overtime, called the “8-80” method. • A Philadelphia Court of Common Pleas ruling last year places hospitals across the state at risk for class action suits for reliance on federal law. HAP worked on the development of this bill.

11. Medical Liability Issues • Benevolent Gesture • The House approved House Bill 495, sponsored by • Representative Keith Gillespie (R-York), which would • make any benevolent gesture made prior to the • start of a medical liability action by a health care • provider inadmissible as evidence of liability or • an admission of guilt. • Mcare Fund • Legislation is also needed to change the method of calculating Mcare Fund assessments to ensure that health care providers are not over charged for Mcare Fund coverage and to phase out the Mcare Fund in a responsible manner

12. HealthCare Facilities Licensing • Pennsylvania licenses thousands of health care • facilities and tens of thousands of health care • professionals. • Pennsylvania’s health care facility regulations are • over 20 years old and they do not recognize all the • changes that have occurred in the health care delivery • system. • Representative Doug Reichley (R-Lehigh) introduced House Bill 1570, which revamps hospital licensure regulations to comply with national accreditation standards. HAP worked with the prime sponsor on the development of this legislation.

13. Federal update HAPAC/HAPAC-Federal

14. Budget Control Act — Stage 1 • Immediate budget reductions of $917 billion . . . extends debt limit by $900 billion to February/March. • No cuts in Medicare, Medicaid, Social Security (except fraud and abuse initiative). • No new revenues.

15. Budget Control Act — Stage 2 • Special bipartisan congressional committee to make additional $1.5 trillion in deficit reduction recommendations by Thanksgiving. • Guaranteed up-or-down vote (and no filibuster) on recommendations if majority of panel support recommendations by Christmas. • Enforcement process . . . debt limit extended by another $1.5 trillion through 2012, IF: • Recommendations of special committee adopted with resolution of disapproval, OR • Congress passes a Balanced Budget Amendment; OR • Automatic across-the-board cuts . . . sequester of $1.2 trillion • evenly divided between defense and domestic programs: • No revenue • Medicaid exempt • Medicare and Social Security “benefits” exempt • Special rules for Medicare providers and insurers (2% of $137 billion • over 9 years starting in 2013 . . . $45 billion from hospitals.)

16. Super Committee — Important Dates Several Medicare hospital payment provisions expire. Oct-1 Committee must hold 1st meeting 45 days after enactment. Sept-16 SGR patch expires. Dec-31 Regular committees can recommend cuts to the supercommittee. Oct-14 Super-committee members appointed. Aug-16 FY11 Continuing resolution expires. Sept-30 Super-committee Report Nov-23 Congressional Votes on SC Report Dec-23 CMS Administrator, Don Berwick’s appointment expires when Congress leaves at the end of the year.

17. Debt Ceiling/Deficit Reduction Legislation – Phase 2 Mandatory Across-the-Board Spending Cuts* PA Hospital Impact (millions) *Analysis includes permanent 2% reduction to anticipated marketbasket update for 2013 (including ACA reductions) only; does not include reductions in GME, IME, DSH, or other payments.

18. Options • Medicaid ($100 billion) • Provider taxes/assessments • Blending rates/FMAP • Medicare • IME ($14 billion) • Bad Debt ($14-26 billion) • Rural adjustment cuts ($14-16 billion) • Post-acute care services ($50 billion) • Medicare IPPS coding adjustments ($4 billion) • Expansion of IPAB

19. Options • Increase retirement age ($125 billion) • Means-testing ($38 billion) • Reform and increase copayments for Part A & B ($110 billion) • Medigap restrictions ($53 billion) • Home health copayments ($40 billion) • SNF copyaments ($50 billion)

20. Advocacy Message • Enough is enough. • Cuts to provider = beneficiaries at risk. • Alternatives exist . . . “reform” or “modernization” vs. • provider ratcheting and blunt cuts.

21. Affordable Care Act (ACA) 10-Year Impact Hospital Medicare & Medicaid Cuts 2010-2019 Revenue = $155 Billion Source: Congressional Budget Office

22. Questions/Discussion