Healthcare reform. This client alert has information that gives a preliminary look at the much publicized healthcare reform bill that was passed by the U.S. House of Representatives on March 21, 2010, and the “Reconciliation Bill” (a/k/a the Health Care and Education Reconciliation Bill) which was subsequently passed by both Houses of Congress and signed into law by the President.

A preliminary look at The Patient Protection and Affordable Care Act. When the House of Representatives passed the Patient Protection and Affordable Care Act late on the evening of Sunday, March 21 (the PPACA was previously passed by the U.S. Senate on Christmas Eve), the nation was abuzz with talk of long-awaited, much debated reform to the U.S. healthcare system. Not long after passing this Act, the House and Senate also both passed the “Reconciliation Bill,” which contained several amendments to PPACA.  

Insurance Reform Highlights. The legislation represents a broad reform of U.S. healthcare system, but one that could be substantially refined before most of its largest reforms take effect in 2013 and 2014. One significant change that will take place is a federally subsidized program to provide health insurance to those currently “uninsurable” in the private market.  

Beginning this year, PPACA will also provide a $250 rebate to those Medicare beneficiaries who hit the prescription drug coverage “doughnut hole.” The “doughnut hole” refers to a gap in prescription drug coverage that makes it harder for millions of Medicare beneficiaries to pay for the medication they need.  

Also included in the PPACA is a requirement that insurance companies allow children to remain on their parents’ insurance plan until they reach the age of 26, or are eligible for their own insurance through work. There also will be a tax credit of up to 35% of the cost of health insurance premiums for businesses with less than 25 employees and average wages of under $50,000. And in the “pre-existing” department, there will now be a restriction on the exclusion from family insurance plans of children under 19 who have pre-existing conditions.

Provider Reform Highlights. Section 3001 of the PPACA highlights the Hospital Value-Based Purchasing Program. This gives a value-based purchasing incentive payment to any hospital that meets performance standards (tied to measurements) established by the Secretary of Health. Under this program, a percentage of hospital’s Medicare payment would be tied to hospital performance on quality measures related to common and high-cost conditions. If a hospital receives a payment reduction, is found to have quality deficiencies, doesn’t have the necessary performance grades or doesn’t meet the necessary caseload threshold, that hospital could be ineligible for incentive payments.  

Sections 3025 (as amended by 10309) highlights the PPACA Hospital Readmission Reduction Program. This will reduce Medicare inpatient hospital payments, effective the start of fiscal year 2012, and will do so on the dollar value of each hospital’s percentage of potentially preventable Medicare readmissions measures identified by the National Quality Forum. Beginning in the 2015 fiscal year, the program will be widened to include four additional measures recommended by MedPAC: acute myocardial infarction coronary artery bypass graft, percutaneous transluminal coronary angioplasty and other vascular issues, as well as others recommended by the Secretary.  

Section 3008 features the Payment Adjustment for Conditions Acquired in Hospitals. Starting in 2015, a hospital will receive a 1% Medicare payment penalty if they fall within the top 25% of all hospitals of hospital acquired conditions determined by the Secretary. The Department of Health and Human Services (HHS) will study the possibility of expanding the hospital acquired conditions policy to other types of facilities, and report back to Congress no later than January 1, 2012.  

There will be substantial changes to the law with respect to physician-owned hospitals. Effective March 23, 2010, hospitals are no longer allowed to increase the percentage of ownership interests held by physicians and existing investments will be capped. Existing physician-owned hospitals licensed as Medicare providers before a qualifying date will be grandfathered and physician ownership will be allowed to continue. The PPACA addresses hospitals that are under development through a cutoff date by which the hospital must have established physician ownership in order to meet requirements for the Whole Hospital Exception. This change in the law has substantial implications for projects that may be in development and will certainly create a myriad of issues.  

Conclusion. Of course, with the girth of the bill being as substantial as it is, more in-depth analysis can be gleaned from this highly publicized reform. If you are able to join us at our briefing presentations this spring dedicated to these and other trends in the industry, we would love to share our insights.