Medicare Compliance & Reimbursement

GAO weighs in on the debate. 

The growing popularity of specialty hospitals has general hospitals in a panic - and lawmakers and regulators may make the lives of physicians who invest in specialty facilities trickier than ever.

While advocates of specialty hospitals maintain that their focused mission improves quality and cuts costs, general hospitals worry that specialty hospitals siphon much-needed revenue from full-scale hospitals without providing the range of services most communities need.

The latest entry into the ongoing debate on the issue is a new report from the General Accounting Office. In "Specialty Hospitals: Geographic Location, Services Provided, and Financial Performance" (GAO-04-167), the GAO finds that specialty hospitals are much less likely to have emergency department than general hospitals. They also treat a smaller percentage of Medicaid patients. In addition, while specialty hospitals perform about as well financially as general hospitals when it comes to Medicare revenue, they tend to do better when all revenue sources are considered.

Those findings could play into the fate of an amendment to the Medicare prescription drug bill that would change the Stark physician self-referral law. The provision would allow physicians to have a financial relationship with a hospital only in the case of a "comprehensive inpatient and outpatient" facility for which the referrals of the physician would be "insignificant in relation to the overall scope of services."

The Centers for Medicare & Medicaid Services appears to back the move. Earlier this year, CMS considered addressing the issue with new regulations and only backed down when agency attorneys concluded that it couldn't make the change, in part because only states have the statutory authority to define the term "hospital."

To see the report, go to www.gao.gov/new.items/d04167.pdf.