Archives for August 2011

States Progress in Forming Health Insurance Exchanges

At the heart of the health insurance reform  under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) is the health insurance exchange (HIE).  For individuals and small businesses with little or no access to employer-sponsored group coverage, the HIE  is supposed to be the “go-to” source for affordable coverage.

The  individual mandate and the HIE form a carrot and stick approach to achieving essential coverage for everyone.  The consumers who don’t participate face a financial penalty, but those who do are guaranteed a certain level of coverage, tax credits for their premiums and, if necessary, help with paying the premiums. Employers must contribute a minimum amount to help their employees buy coverage. If they choose, they can offer the benefits through the HIE. During the first two years,  a tax credit is available.  The health insurance companies have to offer essential coverage and aren’t allowed to use some of their more egregious techniques to avoid paying for the more expensive policyholders. In return, they have a captive market, likely to include younger, healthier workers.

How is this supposed to work? States may house the HIE within an existing government agency, they may create a new government agency or they may set up not-for-profit organization to operate the exchanges. Grants are available to get states started. The computer systems needed are to be shared with, and partially funded by, state Medicaid and Children’s Health Insurance Program  (CHIP) agencies and others sharing the system.

HHS must determine by October 2013 whether state exchanges will be operational by the January 1, 2014 deadline. HIEs must be up and running by January 1, 2014 and must be self-supporting by the next year. If a state does not establish an exchange, HHS will establish one for them.

So, how are states moving toward this goal?  Massachusetts and Utah had them before PPACA.   According to a recent report by the Kaiser Foundation,  least nine states have enacted legislation establishing HIEs. In two, Alabama and Georgia, the governors ordered a study of the feasibility of establishing an exchange. Legislatures in Mississippi and Wyoming passed laws that require feasibility studies.   A few more passed laws stating their intent to establish an HIE.

Mississippi recently received a grant and expects its HIE to be up next yearIllinois also has been awarded a grant to develop and maintain its exchange.

As they establish the exchanges, states also must decide:

  • what form the organization will take, public, private nonprofit, or “quasi-governmental”
  •  the composition of its governing body, including the relative strength of consumer representatives, the insurance industry or healthcare providers
  • how to contract with qualified plans,  as a state exchange may actively purchase  one or more plans, or it may serve as a clearinghouse for information about qualified plans.
  • whether to impose requirements in addition to those set by HHS for qualified health plans
  • how to finance the work of the exchange beginning January 1, 2015.

States were given almost four years to establish their exchanges. Then they have one year to make the exchanges self-supporting. It sounds like a tall order, but if the enactment of Medicare could end racial segregation in hospitals in one year, anything is possible.



End of Week Round Up

This week on Health Wolters Kluwer Law & Business:

IRS Issues Community Health Needs Assessment Guidance for Nonprofit Hospitals


Is your nonprofit hospital required to conduct a community health needs assessment (CHNA)? Internal Revenue Code Sec. 501(r), as added by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), requires health care organizations that are tax-exempt to conduct a CHNA every three years and develop an implementation strategy (IS) for meeting those needs for tax years beginning after March 23, 2012. To provide preliminary guidance on the requirements, the Internal Revenue Service (IRS) published Notice 2011-52, which will apply for at least six months after the IRS publishes further guidance on CHNAs.

Hospitals required to comply. “Hospital organizations” required to conduct CHNAs include:

  • (1) an organization that operates a facility required by a state to be licensed, registered, or similarly recognized as a hospital (“a state-licensed hospital facility”), and
  • (2) any other organization that the IRS determines has the provision of hospital care as its principal function or purpose under Code Sec. 501(c)(3)Sec. 501(r) applies to hospital organizations on a facility-by-facility basis. Accordingly, if a hospital organization operates more than one hospital facility, the organization is required to meet the additional requirements of Sec. 501(r) separately with respect to each facility.  

The CHNA requirements also apply to government hospitals recognized under although the IRS has requested comments on alternative methods for government hospitals to satisfy the requirements. The IRS has not yet determined whether organizations other than state-licensed facilities that provide hospital care are subject to the requirement. The rules do not apply to hospitals outside the United States.

CHNA elements. The CHNA must describe the community served by the facility, the methods used to conduct the assessment and sources of information, organizations that the hospital collaborated with on the CHNA, and how the organization obtained input from the community and from experts. While the IRS expects the community to be based on geography, it also could take into account target populations such as children or the aged or the facility’s principal functions such as a specialty or a targeted disease. The CHNA cannot exclude medically-underserved populations, minorities and low-income groups, and those with chronic diseases. CHNAs must take into account the views of persons who represent the broad interests of the hospital’s community. Hospitals have broad discretion to identify persons who represent the community, including health agencies, consumer groups, experts, patients, health care providers, and insurers.

Written reportsPPACA also mandated reporting requirements for CHNAs. Under Code Sec. 6033(b)(15)(A) as added by PPACA the  IRS will require a hospital organization to document a CHNA for each hospital facility in a separate written report. Hospital organizations must include in their annual information return (i.e., Form 990) a description of how the organization is addressing the needs identified in each CHNA conducted and a description of any needs that are not being addressed, along with the reasons why the needs are not being addressed.

The CHNA must be made widely available to the public, which an organization can accomplish by posting the CHNA on the hospital facility’s website, the hospital organization’s website, or a website maintained by another organization. The IRS requested comments on combining CHNAs for multiple facilities in one written report.

Implementation strategy. The hospital organization’s governing body must adopt an implementation strategy by the end of the same tax year in which the organization conducts the CHNA. The implementation strategy is a written plan of how the organization will meet the community health needs identified that  includes an explanation of why it does not intend to meet a health need. A strategy must be adopted separately for each hospital facility. An organization may develop strategies in collaboration with other organizations, including related organizations, other hospital organizations, government hospitals, and government agencies.

Excise tax  for noncompliance. Code Sec. 4959 as added by PPACA, imposes a $50,000 excise tax on a hospital organization that fails to meet the CHNA requirements for any year. If the organization does not provide a CHNA for its first year or any subsequent year after March 23, 2012, it will be subject to the excise tax. The IRS did not address the consequences of one or more facilities failing to satisfy the CHNA requirements, but will address them in regulations or other future guidance.

Conclusion. The CHNA requirements for nonprofit hospitals are extensive. Hospitals will be impacted by the additional resources required to conduct the CHNA in terms of staff and costs.  The IRS has revamped Form 990 and Schedule H (Hospitals) to reflect the Code Sec. 501(r) requirements, including CHNAs and has issued Notice 2011-52. What issues has your health care organization encountered as you plan for and implement policies and procedures to meet the CHNA requirement?

This blog includes excerpts from Wolters Kluwer, “Exempt Organizations Reports,” Issue No. 445, Report 445, August 15, 2011.

New Health Information Exchange Networks Pop Up Despite Recent Breach

Highmark, Inc. is the next health insurance company to develop its own network that would allow doctors and hospitals across Pennsylvania to easily share electronic health records. Although details on the plan have not yet been released, Aaron Billger, spokesman for the company, said the network is planned to be available to hospitals and doctors across the state. With statewide membership, the company is Pennsylvania’s largest insurer of health.

According to a recent article, Pennsylvania state officials had been considering one centralized exchange for all hospitals and doctors within the state, but officials have since backed away from that model in favor of letting hospitals decide for themselves if they want to create an exchange and how to do it, said Dan Egan, a spokesman for the state’s E-Health Collaborative that is now developing the communication standards.

This newest move in the development of health information exchange was sparked by a $17.1 million grant  to the Pennsylvania Office of Health Care Reform last year from the U.S. Health and Human Services Department. The grant is intended to create standards for sharing electronic medical records in Pennsylvania. The office has estimated that sharing medical records around the state could reduce health care spending in Pennsylvania by $2.8 billion over five years.

Pennsylvania is not the only state benefiting from the grants. Development of organizations to promote health information exchanges is being supported financially by statewide health grants from the Office of the National Coordinator for Health Information Technology. These grants were legislated into the HITECH components of the American Reinvestment and Recovery Act in 2009. These organizations (sometimes referred to as  Regional Health Information Organizations, or (RHIOs)) are usually geographically defined entities which develop and manage a set of contractual conventions and terms, arrange for the means of electronic exchange of information, and develop and maintain HIE standards.

New Hampshire is another state to take advantage of the funding to launch its Health Information Organization, the NH-HIO, developed with the help of the New Hampshire Department of Health and Human Services Office of Health Information Technology, the Massachusetts eHealth Collaborative, and the New Hampshire Institute for Health Policy and Practice, as well as over 80 stakeholders.  

 These exchanges and electronic medical records are being promoted by the federal government as a way to reduce medical errors, prevent duplicative treatments and reduce costs. An exchange would allow a doctor to quickly pull medical records for a patient he or she is treating, no matter where that patient may have been treated in the past, and have access to all of a patient’s medical information.  

“If I could snap my finger and have one thing transform the quality of care in the country, it would be that everyone would have an electronic health record that would be universally accessible,” Joseph McCannon, Senior Advisor to the Administrator, Centers for Medicare & Medicaid Services (CMS). The Department of Health and Human Service’s ONC recently released a video, “The Future of Health Care: Electronic Health Records,” which highlights the benefits of electronic health records (EHRs) using commentary from various leaders in health information technology.  

With all the hype over electronic health information, however, there is still much room for concern, as evidenced by the recent incident with KPMG, Inc. showing that even HIPAA monitors can have a data breach.  The breach occurred in June 2010, when a KPMG employee lost an unencrypted flash drive that may have contained a list with patient names and information about their care. Eight months later, KPMG was chosen by the Office of Civil Rights to develop a HIPAA auditing protocol and conduct audits on 150 covered entities and business associates before Dec. 31, 2012.  

It it still human error that leaves the most room for concern. It is too easy for health care providers to copy patient information onto flash drives, laptops or other unencrypted devices and these are easily lost or stolen.  Somehow, health care organizations must develop a way to monitor these situations and keep the breaches under control. Perhaps the new Information Technology graduate program will help, as they are part of an innovative program aimed at using modern data technology to dramatically improve the U.S. health care system, funded significantly by ONC. With the proper training and tools, breaches like KPMG will hopefully be fewer, and the electronic health records initiative will continue to grow.