Medicare Compliance & Reimbursement

New bill would prohibit physician investor increases in 'grandfathered' specialty hospitals.

Just weeks away from the end of the 18-month moratorium on specialty hospitals, new legislation and a signal from the Centers for Medicare and Medicaid Services has stirred up the physician self-referral ethical dispute.

Critics of physician-owned specialty hospitals cheered Finance Committee Chairman Sen. Chuck Grassley's (R-IA) and ranking member Sen. Max Baucus' (D-MT) May 11 proposed legislation to stop physicians from referring Medicare and Medicaid patients to new specialty hospitals in which they have an ownership interest.

AHA Against Hospitals 'Choosing' Patients

Because physician owners tend to refer healthier, well-insured patients to the facilities they own, the full-service community hospitals are left to provide essential services that are seldom self-supporting emergency services, burn units, trauma care and care for the uninsured, American Hospital Association Executive VP Rick Pollack said in a May 11 statement.

The Hospital Fair Competition Act of 2005 could prevent specialty hospitals from cherry-picking "profitable" patients, leaving community hospitals with uninsured patients and patients with costly medical conditions.

Specialty hospital proponents, such as the American Surgical Hospital Association and the American Medical Association, say the facilities provide better value to patients and are not a threat to general hospitals.

"By performing high volumes of specific services, specialty hospitals can perfect those tasks, increase accountability for the quality of care provided to patients, lower fixed costs and quickly respond to patient needs," said trustee William Plested, MD, during AMA testimony to the House Ways and Means Health Subcommittee on March 8.

But arguments like Plested's may be falling on deaf ears. While ASHA and AMA fight to keep Congress from further extending the moratorium, this new legislation stands to permanently alter the way physician-owned specialty hospitals are allowed to operate.

Meanwhile, CMS Administrator Mark McClellan said in May 12 remarks to the House Energy and Commerce Subcommittee on Health that CMS will not consider any new applications for Medicare reimbursements from specialty hospitals for the remainder of the year.
 
Even though the moratorium ends June 8, McClellan said CMS will hold off on new approvals because it is still in the process of reviewing its policies on the facilities.