State & Federal Advocacy Update forPennsylvania Hospitals & Health Systems

September, 2011

Robert E. Greenwood, Vice President, Health Care Finance and InsuranceThe Hospital & Healthsystem Association of Pennsylvania

State Budget PrioritiesState Budget Priorities

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.

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.

FY2011-12 Medical Assistance BudgetComparison of Proposals

FY2011-12 Medical Assistance BudgetComparison of Proposals

2010-11State $

Appropriation

FY2011-2012 FUNDING

PROPOSED REDUCTIONS RESTORATIONS

STATE TOTAL STATE TOTAL

Smart Purchasing — $86.7 $192.9 86.7 $192.9

Supplemental Payments:

Critical Access Hospitals $4.8 $4.8 $10.7 $3.6 $7.9

Burn Centers $5.0 $5.0 $11.3 $3.8 $8.4

OB/NICU $4.9 $4.9 $11.0 $3.7 $8.2

Trauma Centers $11.5 $11.5 $25.9 $8.6 $19.3

Tobacco Fund (UC and EE) $32.7 $31.5 $73.3 $23.6 $52.6

Physician Practice Plans $9.7 $9.7 $28.8 $4.9 $10.8

Academic Medical Centers $19.2 $19.2 $44.2 $9.6 $21.4

Health Clinics $2.5 $2.5 $2.5 $1.0 $1.0

TOTAL $90.3 $175.8 $400.6 $145.5 $322.5

Impact of State Budget on Hospital PaymentsImpact of State Budget on Hospital Payments

State Medicaid Spending on Hospitals $1.9 B

State Spending Reductions $38.2 M

Increase in Assessment Contribution to the State $50 M

Total Impact on Hospitals $88.2 M

Percentage Reduction in State Medicaid Spending on Hospitals -4.5%

State Budget, Welfare Code 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.

Health Care Bills Signed Into lawHealth Care Bills Signed Into law

Joint and Several Liability (Act 17 of 2011)—TheGovernor has signed into law Senate Bill 1131, asamended.

The bill reforms Pennsylvania’s joint andseveral liability rule by making most defendants incivil case responsible for only their share of any damages.HAP supported the bill.

HAP 2011 Fall Key IssuesHAP 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

Health Insurance ExchangesHealth Insurance Exchanges

The new federal health reform provides states withthe opportunity to create health insurance exchangesas a means of allowing individuals and small businessesto compare qualified health insurance plans and topurchase 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.

Health Information TechnologyHealth Information Technology

Pennsylvania needs to enact legislation to help move theadoption and use of health information technology.

Electronic health care information exchange technology hasthe potential to significantly improve the quality and efficiencyof 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.

OvertimeOvertime

Senator Patricia Vance (R-Cumberland) introduced Senate Bill 1099, which removes the inconsistencybetween state and federal law with respect tocalculating overtime.

Many hospitals calculate overtime pay for employees relying on a federal waiver contained inthe 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.

Medical Liability IssuesMedical Liability Issues

Benevolent Gesture The House approved House Bill 495, sponsored by

Representative Keith Gillespie (R-York), which wouldmake any benevolent gesture made prior to thestart of a medical liability action by a health careprovider inadmissible as evidence of liability oran 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

HealthCare Facilities LicensingHealthCare Facilities Licensing

Pennsylvania licenses thousands of health carefacilities and tens of thousands of health careprofessionals.

Pennsylvania’s health care facility regulations areover 20 years old and they do not recognize all thechanges that have occurred in the health care deliverysystem.

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.

HAPAC/HAPAC-FederalFEDERAL UPDATEFEDERAL UPDATE

Budget Control Act — Stage 1Budget 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.

Budget Control Act — Stage 2Budget 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.)

Super-committee members

appointed.Aug-16

Super-committee members

appointed.Aug-16

Several Medicare hospital payment provisions expire. Oct-1Several Medicare hospital payment provisions expire. Oct-1

FY11 Continuing resolution

expires.Sept-30

FY11 Continuing resolution

expires.Sept-30

Super Committee — Important Dates

Regular committees can recommend cuts to the supercommittee. Oct-14

Regular committees can recommend cuts to the supercommittee. Oct-14

Super-committee

Report Nov-23

Super-committee

Report Nov-23

Congressional Votes on SC

ReportDec-23

Congressional Votes on SC

ReportDec-23

CMS Administrator, Don Berwick’s appointment expires when Congress leaves at the end of the year.

SGR patch expires. Dec-31

SGR patch expires. Dec-31

2011 2012

Committee must hold 1st meeting45 days after enactment. Sept-16Committee must hold 1st meeting45 days after enactment. Sept-16

Debt Ceiling/Deficit Reduction Legislation – Phase 2Mandatory Across-the-Board Spending Cuts*

Debt Ceiling/Deficit Reduction Legislation – Phase 2Mandatory Across-the-Board Spending Cuts*

2013 2013-2021(9 years)

Inpatient Prospective Payment System (PPS) -$88.2 -$836.6

Outpatient PPS -$27.5 -$260.3

Inpatient Rehab PPS -$9.6 -$91.6

Inpatient P Psych Facility PPS -$3.6 -$34.1

Long-Term Care Hospital PPS -$4.9 -$47.0

Home Health PPS -$2.3 -$22.7

Skilled Nursing Facility PPS -$1.6 -$15.1

TOTAL -$137.7 -$1,307.4

*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.

PA Hospital Impact (millions)

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

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)

Advocacy MessageAdvocacy Message

Enough is enough.

Cuts to provider = beneficiaries at risk.

Alternatives exist . . . “reform” or “modernization” vs.provider ratcheting and blunt cuts.

Affordable Care Act (ACA) 10-Year ImpactAffordable Care Act (ACA) 10-Year Impact

U.S. Pennsylvania

“Productivity” and Other Update Cuts $113 B $6.804 B

Medicare DSH Cuts $22 B $522 M

Medicaid DSH Cuts $14 B $928 M

Cuts for “Excess” Readmissions $7 B $383 M

TOTAL $155 B $8.6 B

Source: Congressional Budget Office

Hospital Medicare & Medicaid Cuts2010-2019 Revenue = $155 Billion

4750 Lindle RoadP.O. Box 8600Harrisburg, PA 17105-8600717.561.5318 Phone717.561.5216 Faxbgreenwood@haponline.org

Robert E. GreenwoodVice President, Health Care Finance and Insurance

Questions/Discussion Questions/Discussion