January 19, 2005

Medical Liability
Bush seeks medical liability reform.

State News
Governor Outlines 2005-06 Priorities.
State revenue exceeds expectations.

Septa solution may be in sight?
Inpatient Hospital Service notice published.

DPW receives federal approval for managed care assessment.
Greenwood joins HAP.

Federal News
Pennsylvanians added to key committees.

CMS issues charity care guidance.
MedPAC Action

We would like to wish you a Happy New Year. The 109th US Congress and the 2005-2006 session of the Pennsylvania General Assembly convened earlier this month.

Medical Liability
Bush seeks medical liability reform. Earlier this month the President renewed his campaign aimed at persuading Congress to move medical liability reform this year. The President's proposal includes: securing the ability of patients to get quick, unlimited compensation for their "economic losses", a limit on non-economic damages ($250,000), reserving punitive damages for egregious cases where justified, providing payments of judgments over time rather than in lump sum, ensuring old cases cannot be brought to court years after event, and providing that defendants pay judgments in proportion to their fault. While it is expected that the House will again pass this legislation, Senate leadership is still short several votes to bring this reform legislation to a vote.

State News
Governor Outlines 2005-06 Priorities.
Speaking to the annual Pennsylvania Manufacturer's Association seminar in New York City, Governor Rendell said his priorities for the coming fiscal year are: addressing the expected $1.5 billion shortfall in Medical Assistance, passing his growing greener environmental program, addressing mass transit funding, and addressing higher education funding and workforce development.

State revenue exceeds expectations. State Secretary of Revenue Greg Fajt this week said that revenue collections for the first six months of the fiscal year are running 2.5 percent over estimate - exceeding forecasts by more than $250 million. However, projections of structural deficits in excess of $1.5 Billion for the Department of Public Welfare in FY 2006 portends significant cuts in Medical Assistance payments to hospitals and the possibility of eligibility and/or benefits cuts. We are already engaged in an advocacy effort to forestall such cuts, and expect to participate in an aggressive campaign to rollback such cuts if proposed by Governor Rendell.

Septa solution may be in sight? Earlier this month Governor Rendell and state lawmakers met to try to develop a solution to the mass transit-funding crisis. No legislative solution was reached, but the Governor is hoping to find a solution by the end of February to avert fare increases and service cuts which are scheduled for March.

Inpatient Hospital Service notice published. The Department of Public Welfare (DPW) recently published intent to revise its payment method for inpatient hospital services on or after January 1, 2005. The revisions will affect acute care general hospitals, private psychiatric hospitals, and psychiatric units of general hospitals, rehabilitation hospitals and rehabilitation units of general hospitals. Key revisions include the following:

  • A pilot program beginning July 1, 2005 which would adjust the rate of increase for disproportionate share hospitals' medical education and disproportionate share payments based on individual hospital performance related to certain quality related measures and activities.
  • Conversion of the current Medicare-based Diagnosis Related Group (DRG) payment methodology to the All Patient Refined DRG methodology in calendar year 2006.
  • Establishment of a Medical Short Stay Program to provide for payments for patients seen by hospitals where an inpatient admission is not warranted, but care beyond a typical emergency room visit is required.
  • Representatives from the Health System are involved in discussions with the Department on these new initiatives.

DPW receives federal approval for managed care assessment. Last week, Governor Rendell announced a commitment from Secretary of Health and Human Services Tommy Thompson for approval on the assessment on Medicaid managed care programs in the Commonwealth. The assessment will provide Pennsylvania $163 million annually and will allow rates for the Medicaid managed care plans to be increased.

Greenwood joins HAP. Former Pennsylvania House Appropriations Director and Deputy Budget Secretary Robert E. Greenwood has joined the Hospital and Healthsystem Association of Pennsylvania (HAP). He will be the Vice President of Health Care Finance and Insurance.

Federal News
CMS issues charity care guidance. The Centers for Medicare and Medicaid Services (CMS) issued guidance earlier this month that confirms that hospitals can offer discounts to any uninsured patients without putting the hospital's Medicare payments at risk. According to the guidance, hospitals are not required to provide "individualized determinations of need." In a related development, the hospital community has seen several successes recently in having courts across the county dismiss several of the claims challenging hospitals billing and collection policies as not consistent with their tax-exempt status. However, it is possible that in the upcoming session of Congress, further hearings on billing and collection policies might be convened.

Pennsylvanians added to key committees. Earlier this month the House Republican Conference confirmed its committee appointments and Pennsylvania's representation increased on two key health care committees. Representative Melissa Hart (R-Bradford) joins Representative Phil English (R-Erie) on the Ways and Means Committee, and Representative Tim Murphy (R- Upper St. Clair) joins Representative Todd Platts (R-York) on the Energy and Commerce Committee.

MedPAC Action. Last month, the Medicare Payment Advisory Commission developed draft recommendations calling on Congress to give hospitals a full market basket update for FY 06, basing its recommendation on increasing negative hospital operating margins. However, the Commission reversed that position at its January meeting, recommending Congress provide hospitals with an FY06 update of market basket minus 0.4 for inpatient and outpatient services. Ralph Muller, a member of MedPAC, put forward a full market basket update, but it was not acted on by the MedPAC members. Muller cited increases in medical malpractice premiums, nursing costs, and prescription drug cost increases as justification for the full increase.

MedPAC also recommended that Congress increase physician payments by 2.7 percent for FY 06. Even if Congress adopts the Commission's recommendation, physician payments remain tied to the sustainable growth rate formula, which calls for payment reductions if spending for physician services exceed SGR projections. This adjustment will require changes to leadership's current budget plans.

Finally, in an attempt to level the playing field between physician-owned specialty hospitals and full-service hospitals, MedPAC developed several recommendations for Congressional consideration. Congress could revise the way Medicare reimburses services under the DRG system by moving to a cost-based rather than a charged-based reimbursement system. MedPAC also proposed extending the current specialty hospital moratorium as mandated by the Medicare Modernization Act until Jan. 1, 2007. Another recommendation would allow hospitals and physicians to enter into gain sharing agreements.

If you would like a copy the most recent listing of RFAs, notices, and program announcements relating to federal research funding opportunities prepared by the University Office of Government, Community and Public Affairs, please email Shelly at Kryciam@uphs.upenn.edu.

The Government Relations Weekly Update is provided by the
Office of Government Relations of the University of Pennsylvania Health System

Shelly Krycia or Alan N. Rosenberg
Government Relations Office
University of Pennsylvania Health System
2021 Penn Tower/4385
Phone: 215-349-5136
Fax: 215-662-3910

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