Mayor Menino recently appointed a task force to review policies related to payments in lieu of taxes (PILOTs) made by the city's non-profit institutions.  The task force, the task force will be chaired by Stephen Kidder, former revenue commissioner, members are:

• Robert Brown, President Boston University
• Zorica Pantic, President Wentworth
• Thomas Glynn, Partners Healthcare
• Patricia McGovern, Beth Israel Deaconess Medical Center
• City Councilor Stephen Murphy
• Thomas Nee, Boston Police Union
• James Gallagher, John Hancock Financial Services
• Gail Latimore, executive director of the Codman Square Neighborhood Development Group.

The charge of the task force is to:
1)  Set a standard level of contributions, in programs and payments, to be met by all major nonprofit land holders in the city.
2)  Develop a standard methodology for valuing the community partnerships made by tax-exempt institutions.
3)  Propose a structure for consolidated program and payment negotiation system, which will allow the city and its tax-exempt institutions to structure longer-term, sustainable partnerships focused on improving services for Boston residents.
4)  Clarify the costs associated with providing city services to tax-exempt institutions
5)  If necessary, provide recommendations on legislative changes needed at the city or state level.

Fore more information see the COBTH issue brief on non-profit hospitals and Boston Municipal Research Bureau report on tax exempt property.

The House has approved and the Senate is expected to approve shortly differing versions of the American Recovery and Reimbursement Act (H.R.1 & S. 336). Both bills include a temporary increase in the Federal Medical Assistance Percentage (FMAP). The U.S. Government Accountability Office (GAO) estimates that under the House proposal, Massachusetts would received an additional $3B over the next 27 months. Both bills also include significant funding increased for the National Institutes of Health. Items of interest to hospitals include:

Governor Patrick recently submitted his proposed FY10 state budget to the legislature for consideration.  The $27.9B package is an overall increase of 0.5% over FY09 levels (accounting for cuts made after initial passage of the FY09 Budget).

MassHealth program spending for FY10 is projected at $8,970.2 M, which is $554.4 M (or 6.6%) above the FY09, projected spending. However, this growth includes moving $290M in spending not previously in MassHealth budget (including the Children’s Behavioral Health Initiative, the Essential Community Provider Trust Fund, and certain hospital and physician rate payments and pay-for-performance payouts) into the MassHealth budget.  After adjusting for threes new on-budget items and a projected caseload increase of 4.5%, Masshealth spending would decrease by 0.3%.

The budget includes a number of Masshealth initiatives of interest to hospitals, including:

• MCO-Hospital Contracting - The budget requires or provides incentives MCO-participating hospitals to contract at no more than MassHealth Fee-For-Services (FFS) rates.  Providers who do not do so would not be eligible to participate in the MassHealth MCO program or would need to participate on an out-of-network basis, but would still be permitted to participate in the Medicaid FFS program.
• Alternative Payment System - Masshealth would be authorized to proceed with one or more alternative payment demonstrations with interested hospitals, physician groups and other provider groups. This project will establish an aggregate prospective payment to cover the total cost of a defined set of health care services delivered by a provider or provider system for certain diagnoses, with the goal of enhancing incentives for providers to manage costs and utilization, integrate services, and focus on quality, as opposed to volume.
• Base Rate Increase - the FY10 base hospital rate increase of 0.5%, or $6M.
• Reduced outlier payments - Hospital outlier payments will be reduced using new payment methodologies, MassHealth will now reimburse providers for outlier payments at 75% of per diem rates, instead of the current 85%.
• Hospital community reference pricing - MassHealth will collect relative payment data from industry sources and calculate the most efficient payment level for certain services.  MassHealth would only pay the efficient payment level or “reference price”. MassHealth will work with the hospital industry to identify appropriate pricing policies.
• Non-payment for hospital-acquired infections, serious reportable events and preventable readmissions - MassHealth will no longer pay for for some hospital-acquired infections and preventable readmissions, as part of the state’s HealthyMass initiative. It is estimated that this initiative will result in $10M in savings.
• Specialty hospital rate adjustment - this proposal gives discretion to the Executive Office of Health and Human Services to identify the unique circumstances of certain hospitals that warrant a modified payment methodology, it is estimated that overall adjustments will increase by $12M..