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As the United States House of Representatives was adjourning for the August recess, it completed action on the Children’s Health and Medicare Protection Act (CHAMP Act), the primary purpose of which is to extend the State Children’s Health Insurance Program (SCHIP), due to expire at the end of September. Much of the national media has covered the SCHIP issue, and thus I will not repeat it in this column. The CHAMP Act is loaded with other significant provisions of interest to healthcare. The following is a summary of some of the significant inclusions.



Physician-Owned Hospitals.

The CHAMP Act essentially eliminates the future use of physician-owned hospitals. Hospitals who do not have a provider agreement as of July 24, 2007 cannot receive referrals from physician owners. Similarly, existing hospitals must recalibrate their equity to have aggregate physician ownership of no more than 40 percent and individual physician ownership of no more than 2 percent. Furthermore, existing hospitals with physician ownership cannot expand their number of beds or add new operating rooms. The executive director of Physicians Hospital America has stated that this is a lethal blow to the concept of physician owned hospitals.

The debate of recent years has been about specialty hospitals. Supposedly, this provision is targeting the specialty hospital business model, which principally would be heart hospitals and orthopedic/surgical hospitals. Expanding this provision to include all physician ownership of acute care hospitals is a bright line development, but one that has not been well debated and certainly has not been documented in terms of need or justification.



Physician Payment.

For the past several years, physicians have dodged a cut in Medicare payments due to a flawed construction in the sustainable growth rate (SGR) utilized by the Medicare Payment Advisory Commission. The cumulative effect is that the physicians were scheduled to get a 10 percent pay cut from Medicare beginning in 2008. The CHAMP Act addresses this issue by providing a recalculation of the SGR, to benefit future years. It also provides that physicians would get an 0.5 percent rate increase in 2008 and 2009.


Medicare Advantage.

The Medicare Advantage (MA) is a program about which there is significant disagreement between the Democrats in Congress and the Republican White House. Congress believes the MA plans have been receiving rate increases that are too generous. CHAMP cuts back on MA plan funding, the purpose of which is to meet the fiscal note for expanding SCHIP and fixing the physician payment formula. At issue is a competitive model debate (free market versus administrative pricing) between Congress and the White House. This debate will reappear in many areas, including Medicare Part D.

The CHAMP Act also includes provisions protecting beneficiaries from deceptive MA Plan marketing practices. This is an area that has recently received a lot of publicity. The act proposed to restrict these marketing tactics and also simplify the means by which beneficiaries may exit an MA plan.



Part D.

One of the big success stories is that the Medicare Pharmaceutical Benefit (Part D) has come in under budget in its early stages. The donut in the benefit and the low income subsidy (LIS) remain two areas for active public debate. The CHAMP Act modifies the asset test for the low income subsidy. Beginning in 2009, an individual with assets of $17,000 ($34,000 per couple), would become eligible for the LIS.

The House version of the CHAMP Act is loaded with Medicare provisions. It is the first attempt by the Democratic House to address all its issues of the past decade. The Senate version of the SCHIP extension is much more modest. A conference will occur in September and a bill will be sent to the President. The President has stated his intention to veto the bill, if it is the form of the CHAMP Act passed by the House. Assuming significant concessions are not granted in conference, expect the real debate to begin in October after the President’s veto and when the legislation is returned to Congress. This is a must-pass bill due to the popularity of SCHIP and the need for legislative reauthorization.

Stay tuned for further developments.



Richard G. Cowart is chairman of the health law/public policy department of Baker, Donelson, Bearman, Caldwell & Berkowitz. He can be reached via dcowart@bakerdonelson.com.




September 2007

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