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Medicare group joins MedPAC on specialty hospital certification suspension
MedPAC says specialty groups show ‘little impact’ on general hospital profits but needs time for new DRG adjustments.
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The pressure on specialty hospitals is rising. The Centers for Medicare and Medicaid Services has a new four-part plan that would limit payments to specialty hospitals and reconsider whether they should get treated the same as community hospitals.
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In his May 12 testimony to the House Committee, Centers for Medicare and Medicaid Services (CMS) administrator, Mark B. McClellan, MD, PhD, said that the organization will do the follow regarding specialty hospitals:
- examine the Medicare Payment Advisory Commission’s suggestions to reform inpatient payment rates;
- reset fees paid to ambulatory surgical centers;
- reconsider what constitutes a “hospital” for payment purposes; and
- review criteria for approving new specialty centers.
CMS should complete the review by January 2006 and will table certification requests for specialty hospitals until then, McClellan said.
In a study examining the practices of 11 physician-owned specialty hospitals, the CMS found the facilities primarily service outpatients and thus fall short of Medicare’s standard definition of a hospital. Specialty hospitals might call themselves “hospitals” rather than ASCs (ambulatory surgical centers) in part to receive the higher fees that apply under the hospital outpatient prospective payment system (OPPS) vs. the ASC payment system, MeClellan said. The CMS expects to release a new ASC fee schedule by Jan. 1, 2008.
MedPAC urges extension
The testimony comes two months after the Medicare Payment Advisory Commission’s (MedPAC) recommendation that the moratorium on specialty hospitals be expanded to January 2007. The current moratorium was to end June 8. MedPAC Chairman Glenn M. Hackbarth said that the extension allows time for legislative and rate adjustments to take effect.
In its March report to Congress, the commission proposed the following:
- better inpatient payments by refining diagnostic related groups (DRGs), determining weights on cost of care and “basing the weights on the national average of hospital’s relative values in each DRG;”
- empower the MedPac Secretary to adjust DRG relative weights to account for high-cost outlier cases and to incorporate “case-mix measurement and outlier policies over a transitional period; and
- empower the secretary power to approve certain gainsharing agreements between hospitals and physicians and regulate them regarding quality of care and allowable financial incentives.
Survey findings
Those opposing specialty hospital status contend that the centers drain money from general hospitals and leave community hospitals with the poorest and sickest patients. To explore these claims, MedPAC compared differences in all-payer margins between hospitals facing competition with area specialty centers and those without such competition. The commission found a –4.0% total drop in revenues for hospitals with specialty competition between 1997-2002. But hospitals without area specialty centers showed a comparable loss of –3.7% over the same period. Community hospitals competing against heart-specialty centers showed the greatest profit decrease (–3.0%). These hospitals reported compensating for lost cardiac profits by cutting staff, or emphasizing rehab or pain management, the committee wrote.
While specialty hospitals had “little impact on community-hospital profitability through 2002,” it did appear that community hospitals ended up with sicker and poorer patients, the committee wrote in its report. “Specialty hospitals had lower severity patient mixes than peer, competitor or community hospitals.” The report added that specialty hospitals, “ … are also much less likely to treat low-income patients, as measured by the share of hospitals receiving disproportionate share hospital (DSH) payments under the Medicare IPPS [inpatient prospective payment system].”
Unfair and unsound
But some medical officials and surgeons call MedPAC’s proposed expansion of the moratorium is unfair and statistically unsound. “Here we are again being used as a pawn for trying to get lawmakers to revamp a system that will take quite a while to revamp,” said chief executive officer of the Orthopedic Hospital in Oklahoma, Don B. Burman. “There’s quite a lot of work that’s going to need to be done in the restructuring of the DGR system, and we’re for that as long as it’s on a level basis. But we’ve served our time,” he told Orthopedics Today.
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Burman said that the proposals seek to keep money in the pockets of general hospitals. “What you find is that these institutions are cash-rich institutions and they do not want to give up control, they do not want to give up market shares and they do not want to give away cash positions in these markets,” he said. “And it comes down to those three issues. So, it’s all about the cash,” Burman said.
Moratorium proponents may have a limited view of specialty hospital clients, said Robert H. Haralson, III, MD, MBA, executive director of Medical Affairs for the American Academy of Orthopaedic Surgeons. “There are a lot of people … who are saying that specialty hospitals cherry pick, that we take only patients who are covered by insurance and do not take care of the underprivileged and Medicare and Medicaid [patients],” Haralson told Orthopedics Today. But he noted a 2004 American Surgical Hospital Association survey that found that specialty centers received 35.5% of revenue from Medicare and Medicaid. The survey also noted that 5.3% of treatment was “uncompensated.”
Effects of the moratorium
Burman’s nearly four-year-old specialty hospital in Tulsa was not directly affected by the current moratorium -- but may be crippled by an extension. “If the moratorium is extended, the chances of us surviving another three years without additional physicians being interested and wanting to control their own destiny could jeopardize our institution in total,” he said.
“At the end of the day, the patients have no choice,” Burman said. “If we lose this fight, then the patients will be relegated to the health care that they’ve been forced to endure before specialty hospitals became part of the landscape,” he said.
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