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US Supreme Court Ruling on the

Patient Protection and

AffordableCare Act of 2010

On June 28, 2012, the U.S. Supreme Court (the Court) upheld the Patient

Protection and Affordable Care Act (the Act) of 2010 by a 5 to 4 vote. The

Court indicated in their decision that the healthcare reform legislation does

not violate the Constitution based on Congress power to tax or fine for

non-compliance with a law.

One of the key components of the Act is the individual health insurance

mandate, which would take effect in 2014. Under the health insurance

mandate, individuals would be required to have health insurance or face

penalties. Many states currently provide health insurance to adults with

children. Childless adults who are not covered by Medicaid will now be

required to obtain health insurance in accordance with the health

insurance mandate. Uninsured low-income adults that cannot afford health

insurance coverage may apply for a financial hardship exception or pay a

penalty.

In addition, accountable care organizations ("ACO") should continue to

expand under the Act. An ACO is a type of payment and delivery reformmodel that seeks to tie provider reimbursements to quality metrics and

reductions in the total cost of care for an assigned population of patients.

With the expansion of ACOs and the continued government budget

restraints in health care spending, consolidation of provider organizations

such as hospitals and nursing homes will also continue to increase.

One part of the act that was determined to be unconstitutional related to

Medicaid expansion. The Act would have forced states to expand their pool

of Medicaid-eligible members or risk losing all Medicaid funding. Under the

ruling, the Court indicated that this was beyond the authority of Congress

to change the nature of Medicaid for individual states. Accordingly, the

expansion of the Medicaid program is constitutional as long as the federalgovernment does not bar states from continuing to participate in the

existing Medicaid program based on the condition that they agree to expanded coverage.

Effect of the Act on Healthcare

The Act will have several effects on our healthcare system. Key items that

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we would expect in the future as a result of the Supreme Courts decision

are:

The accountable care organization model use to provide health

care will increase

With the uncertainty removed regarding the Act, health care

investment and expansion capital should increase

Regulatory pressure will continue to increase from government

entities

Consolidation of providers will continue due to on-going

reimbursement cuts

Medicaid managed care will increase substantially as states look

for ways to control spending and limit their risk related to

healthcare costs

Employers will begin to get ready and budget for 2014, when the

Act requires that most employers provide health insurance for all

full-time employees and their dependents or pay a penalty

Seniors who are eligible for the Medicare drug benefit will pay lessfor drugs paid after the initial Medicare coverage

The Medicaid Redesign Team should receive the final green light to

move forward with its initiatives

Reminder of provisions included in the Act

While much time has been spent deliberating whether or not the Act would

be repealed, certain provisions included in the Act are approaching that will

effect providers. Below are some key provisions of the Act that providers

should keep in mind:

Under the Act, nursing homes are required to have effective

compliance and ethics programs. The Act gives nursing homesuntil 2013 to adopt such a program. After three years, the

Department of Health and Human Services will conduct an

evaluation to determine whether this requirement has resulted in

a decrease in nursing home citations or other indications that

nursing home quality has improved.

The Act empowers state ombudsmen to demand nursing home

companies make the details of elaborate corporate structures

public. This could have an effect on the structures of private

providers of health care.

In accordance with the Act, grants to state-approved community

colleges or community-based training programs are available for

the development, evaluation and demonstration of trainingprograms for nursing home aides and home health aides on-

campus, at alternative sites, and through telehealth

methodologies. Accordingly, resources for these type of providers

should increase.

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Hospitals will be required to conduct a community health needs

assessment (CHNA) at least once every three years. (This CHNA

requirement is effective for tax years beginning after March 23,

2012).

Beginning federal fiscal year 2013, the Centers for Medicare &Medicaid Services will be able to penalize hospitals based on

readmission rates.

Final thoughts

As a trusted business advisor and leader in the health care industry,

OConnor Davies will continue providing guidance and analysis of this

historic decision and the effect it has on our healthcare system. If you have

any questions about the information discussed in this Alert, please contact

Chris McCarthy at 914-341-7018 or Keith Solomon at 914-341-7078.

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