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Publication

March 25, 2010Client Alert

Health Care Update - March 2010

This March 2010 Update contains summaries of the following health care topics:
(1) Federal Health Reform
(2) The Health Care Transparency Bill
(3) Denial of Property Tax Exemption to Non-Profit Hospital
(4) Electronic Health Records – Federal and State Efforts

1. Federal Healthcare Reform

On March 21, 2010, the U.S. House of Representatives passed the Patient Protection and Affordable Care Act that was previously passed by the U.S. Senate on Christmas Eve. Shortly after passing PPACA, the House also passed the Health Care and Education Reconciliation Bill (the “Reconciliation Bill”) that contained several amendments to PPACA. The Senate and House have now both passed a slightly modified version of the Reconciliation Bill (both on March 25) and it awaits the President’s signature next week.

The legislation represents a broad reform of U.S. healthcare but could be refined before most of its largest reforms take effect in 2013 and 2014. As of now, provisions that will be implemented within the first year include:

  • A federally subsidized program to provide health insurance to those currently “uninsurable” in the private market – similar to the Wisconsin program known as the Health Insurance Risk-Sharing Plan or the Illinois Comprehensive Health Insurance Program;
  • A $250 rebate to those Medicare beneficiaries who hit the prescription drug coverage “doughnut hole;”
  • A requirement that insurance companies allow children remain on their parents’ health insurance plan until they turn 26 or are eligible for their own insurance through work;
  • A restriction on the exclusion from family insurance plans of children under 19 who have pre-existing conditions;
  • Lifetime limits on the total dollar value of coverage are prohibited, as well as rescission of coverage for reasons other than fraud; and
  • A tax credit of up to 35% of the cost of their health insurance premiums for businesses with fewer than 25 employees and average wages of less than $50,000.

2. THE HEALTH CARE TRANSPARENCY BILL

Governor Doyle signed the Health Care Transparency Bill (the “Bill”) on March 9, 2010. This law creates a number of affirmative obligations for Wisconsin health care providers, hospitals and health insurers beginning in 2011. Notably, the Bill does not apply to nursing homes, a health care provider that practices individually, or a health care provider that is an association of three of fewer individual health care providers.

Covered providers and hospitals must:

  • Provide, upon request, a document that lists for each of 25 different sets of services (75 different diagnostic related groups for hospitals):(1) The provider’s median billed charge,
    (2) The Medicare payment to the provider, if applicable, and
    (3) The average allowable payment from private, third-party payers.
  • Provide the median of the prices the provider has charged for the service the consumer specifies (does not apply to hospitals).
  • If the hospital or provider submits data to an organization that produces reports on comparative quality of health care providers, make available information on how to obtain such comparative data to the consumer making any of the above requests.
  • Prominently display in its facilities a notice indicating the consumer has the right to make requests for any of the above information.
  • A health care provider is required to update its list annually, and a hospital is required to update it quarterly.

Insurers must:

  • Upon request by an individual insured under one of its plans, provide a good faith estimate of the individual’s expected out-of-pocket costs for a specified health service in a specified geographic region. The Bill allows insurers to require certain information from the requestor prior to providing the good faith estimate.

Providing the median charge or good faith estimate described above in no way legally binds the provider, hospital or insurer to such price.

3. DENIAL OF PROPERTY TAX EXEMPTION TO NON-PROFIT HOSPITAL

On March 18, 2010, the Supreme Court of Illinois upheld a denial of a charitable exemption to property taxes for Provena Hospitals (“Provena”). Although Provena is a non-profit, 501(c)(3) corporation exempt from federal income taxes, the Illinois Department of Revenue and Supreme Court determined that various parcels it owns in Urbana, in connection with its ownership of Provena Covenant Medical Center (“PCMC”), were not exempt from taxation. It is worth noting that Provena had the burden of establishing its entitlement to exemption as well as demonstrating clear error in the Department of Revenue’s original ruling. Although nothing in the Illinois statute[1] mentions charitable care by health care providers, the Court cited among its various reasons the fact that, for the year in question, PCMC’s charity care program amounted to a cost of “0.723% of PCMC’s revenues for that year and was $268,276 less than the $1.1 million in tax benefits which Provena stood to receive if its claim for a property tax exemption were granted.”[2] The Court did not explicitly hold that exemption will only be available if the value of the charity care provided exceeds the potential property tax, but the dissent and subsequent commentators are concerned that such a standard will be implied in future cases.

If a hospital is facing a challenge to its property tax exemption, take-home points from this case include:

  • Address both: (1) how the property itself serves a charitable purpose, and (2) how the property owner serves a charitable purpose.
    • Appellant framed most of its arguments in the context of how PCMC operated charitably but largely failed to address how Provena, the actual owner, also served a charitable purpose.
    • The Court repeatedly mentioned how a lack of evidence on this latter point failed to overcome Appellant’s burdens.
  • While operating a charity care program, calculate the amount of charity care granted in terms of the “actual cost” to the provider.
    • The Court viewed PCMC’s charity care in these terms and would not consider it in terms of the aggregate “list price” for services.
    • Therefore, if a provider is trying to meet a charity care goal, such as a certain percentage of revenue or an amount equal to its property tax exemption, it should use “actual cost” in its calculations to be best prepared for an exemption challenge.
  • Have a defined charity care program in place.
    • Distinguish the charity care program from merely writing off bad debt.
      • The program should have specific standards in place for eligibility and be available on a prospective basis to patients, and the provider should make efforts to advertise or otherwise make the program’s existence known.
      • The Court stated, “As a practical matter, there was little to distinguish the way in which Provena Hospitals dispensed its ‘charity’ from the way in which a for-profit institution would write off bad debt.”[3]
    • Document ways in which the provider’s charitable efforts directly benefit the state and the county that would otherwise be collecting tax revenue.

4. ELECTRONIC HEALTH RECORDS – FEDERAL AND STATE EFFORTS

Under the 2009 federal legislation commonly called “The Stimulus Bill,” a program of incentive payments through Medicare and Medicaid was established to encourage health care providers to transition to systems of electronic health records (“EHR”). Under the bill, payments would be made to health care providers who implement a certified EHR system and demonstrate meaningful use of that system. At the very end of 2009, some initial guidance was provided on how a provider would demonstrate “meaningful use” of an EHR system. At the beginning of March, additional guidance was provided on how a system would become “certified.” Both sets of guidance were released to seek comments from the public and will be finalized later this year.

Identical bills are moving through the State Senate and Assembly to position Wisconsin to receive significant federal money to put toward creating a secure electronic health information exchange. As the federal payments mentioned above encourage individual providers to adopt EHR systems for their practices, the goal of this program is to create the infrastructure to allow for the secure and efficient exchange of that electronic health information between unrelated providers.

The state legislation allows DHS to oversee a nonprofit corporation that will be organized for creating, implementing and maintaining such an exchange. Governor Doyle has named 15 members to the Wisconsin Relay of Electronic Data (WIRED) for Health Board – which will oversee the corporation. Wisconsin has already been allocated $9.4 million dollars and could receive an additional $500 million to $800 million. Both Senate and Assembly committees expect to vote on the bill this month, and the next floor period in which the Senate and Assembly will be taking votes is April 13th–22nd.



[1] 35 ILCS 200/15-65.

[2] Provena Covenant Medical Center et al. v. The Department of Revenue et al., Slip Op. 107328, at 8 (IL March 18, 2010).

[3] Id. at 22.


Additional Client Alert:   Health Reform Legislation Signed; Will Impact All Employers and Health Plans
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