President vows to veto proposed legislation

On Tuesday afternoon President Obama announced that he would veto HR 3630, the Middle Class Tax Relief and Job Creation Act of 2011 if it is passed by both chambers of Congress.  This bill, proposed by chairmen of various House committees, would have updated the sustainable growth rate, extended some rural Medicare "extenders" and reauthorize expiring tax provisions. The legislation failed to include the following, expiring provisions:

  • Outpatient Hospital Hold Harmless Provisions: Small rural hospitals (100 beds or fewer) receive Medicare payments so that they are held harmless from the effects of the outpatient prospective payment system.
  • Section 508 Hospital Payments: Created as part of the Medicare Modernization Act (MMA) of 2003, certain rural hospitals, commonly referred to as “Section 508 spitals” are reimbursed by Medicare at rates that better account for the valuable service they provide to rural communities.
  • Extension of physician fee schedule mental health add-on: Increased payment rate for psychiatric services delivered by physicians, clinical psychologists and clinical social workers by 5 percent.
The legislation proposed to pay for the included extensions by cutting various reimbursements to hospitals and other health care sources.  Specifically, the legislation would:
  • Reduce bad debt payments for Critical Access Hospitals, Rural Health Clinics, PPS Hospitals, and Federally Qualifying Health Centers
  • Reduce reimbursements to  PPS hospitals for hospital-based primary care physician practices. Currently the hospitals are paid a full APC rate plus a “reduced” physician fee schedule rate.    This will severely hurt rural PPS hospitals that have employed primary care physicians in their community in order to provide the needed access to care.
  •  Alter payments to Medicaid disproportionate share hospitals (DSH). The proposal would "rebase" the payments given to applicable facilities and reduce these payments by over $4 billion in
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