Medicare Compliance & Reimbursement

New set of restrictions parallel the just-lifted moratorium.

Just as specialty hospitals were breathing a sigh of relief when the 18-month moratorium ended on June 8, the Centers for Medicare and Medicaid Services put up a few more roadblocks.

CMS froze approvals for new physician-owned specialty hospitals beginning June 9 and ending in January 2006, essentially extending the moratorium until the end of
the year. The agency is hoping this gives Congress more time to pass strict legislation on specialty hospitals.

CMS instructed its regional offices and survey agencies to suspend specialty hospital Medicare enrollment applications submitted after the moratorium's end-date in a June 9 letter.

CMS ROs and SAs also should not issue any new provider agreements or authorize an initial survey in any specialty hospital that submitted an enrollment application on or after June 9, CMS said. CMS plans to conduct an extensive review of its specialty hospital enrollment procedures during the six months and plans to reform its inpatient prospective payment system, more specifically its diagnosis-related groups, to reduce any unfair payment advantages specialty hospitals may have over community hospitals, according to a June 9 CMS fact sheet.

CMS wants to revamp its allegedly overpaid cardiac, orthopedic and surgical DRGs to reflect more closely the severity of a patient's illness.

AHA, FAH Rally For Legislation

These new sanctions arise barely two days after the American Medical Association called the end to the moratorium "a victory for high-quality health care" in a June 7 statement. "Patients can now continue to benefit from the increased choice and competition that results from specialty hospitals," AMA trustee William Plested, MD, said.

But specialty hospital opponents are pushing for strict legislation. Specialty hospital legislation should "[take] into account how the inherent conflict of interest in physician self-referral hurts patients and deprives communities of vital health care services," the American Hospital Association and the Federation of American Hospitals said in a June 8 joint statement.
 
The legislation that Congress is currently considering is Finance Committee Chairman Sen. Chuck Grassley (R-IA) and ranking member Sen. Max Baucus' (D-MT) Hospital Fair Competition Act of 2005, which prohibits physicians from referring Medicare and Medicaid patients to new specialty hospitals in which they have an ownership interest.