CMS To Adjust Medicare Payments to Specialty Hospitals, USA

Main Category: Medicare / Medicaid / SCHIP
Article Date: 17 May 2005 - 0:00 PDT

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CMS will not review any new applications for Medicare reimbursement of specialty hospitals until the end of the year while it considers possible changes to payment rules, CMS Administrator Mark McClellan said Thursday at a House Energy and Commerce... Subcommittee on Health hearing, the Wall Street Journal reports (Lueck, Wall Street Journal, 5/13). A provision in the 2003 Medicare law placed a moratorium on the construction of new specialty hospitals until June 8. In a committee hearing on March 8, the Medicare Payment Advisory Commission recommended that Congress extend the moratorium until Jan. 1, 2007. Some larger, full-service hospitals maintain that specialty hospitals "cherry pick" the most profitable patients. Senate Finance Committee Chair Chuck Grassley (R-Iowa) and ranking member Sen. Max Baucus (D-Mont.) on Wednesday introduced a bill that would extend the moratorium, which would take effect on June 8 regardless of the time of enactment (Kaiser Daily Health Policy Report, 5/12). According to CQ HealthBeat, CMS opposes extending the moratorium. The agency on Thursday released a study finding that quality of care at doctor-owned specialty hospitals that provide cardiovascular services is as good as or better than care at traditional hospitals and that patient satisfaction at specialty facilities is "very high" (CQ HealthBeat, 5/12).

Payment Review
In a review that likely will continue until January 2006, CMS plans to "scrutinize whether specialty hospitals meet Medicare's definition of a hospital," the Journal reports (Wall Street Journal, 5/12). CMS currently defines a hospital as "a facility that provides primarily inpatient care," the AP/Las Vegas Sun reports. Facilities that fail to meet that requirement could be classified as ambulatory surgery centers, which receive lower reimbursement levels (Freking, AP/Las Vegas Sun, 5/12). The review also could lead the agency to require some specialty facilities to add emergency departments, which "ten[d] to attract Medicaid and other low-income patients," CQ HealthBeat reports (CQ HealthBeat, 5/12). In addition, CMS is expected to adjust Medicare reimbursement rates for all providers to better reflect the severity of patients' illnesses, which could lower reimbursement rates for some specialty services. McClellan said, "Our current payment system may not provide appropriate incentives for maximizing quality and costs for our overall beneficiary population" (AP/Las Vegas Sun, 5/12). He added, "We will instruct our state survey and certification agencies to refrain from processing further participation applications until this review is completed and any indicated revisions are implemented" (CongressDaily, 5/12).

Reaction
Randy Fenninger, a spokesperson for the American Surgical Hospital Association, questioned whether CMS has the authority to refuse to process applications of hospitals licensed by the state. He said, "I'm not saying we'll sue over it, but we'll protest that." Fenninger added, "We're obviously concerned with anything that would put the brakes on the industry and keep people from making legitimate investments" (Wall Street Journal, 5/12). The American Medical Association issued a statement saying, "Physician-owned specialty hospitals have not harmed general hospitals financially. They have improved care for Medicare beneficiaries and other patients, and patient satisfaction with these hospitals is extremely high." However, Thomas Nickels, senior vice president of the American Hospital Association, said, "We don't believe many of these [specialty] hospitals are whole hospitals, and we're pleased CMS will investigate whether those institutions deserved to be compensated as hospitals" (AP/Las Vegas Sun, 5/12).

Legislative Proposals
House Energy and Commerce Chair Joe Barton (R-Texas) said he has no plans to mark up the Grassley-Baucus bill that would extend the moratorium (CongressDaily, 5/12). Barton said he considers McClellan's action to be a reasonable compromise. "The rise of specialty hospitals will press traditional community hospitals to become leaner, faster and better," he said (AP/Las Vegas Sun, 5/12). Speaking in response Democrats' concerns about physician self-referrals, Barton said, "The real fight ... here is not about quality of care," adding, "It's about control and ownership." He said that banning specialty hospitals goes "against everything in the American culture that says specialization is good." According to CQ HealthBeat, the CMS announcement, "coupled with the absence of apparent GOP support in the House" for an extension of the moratorium, "appeared to lower the odds that Congress" will adopt the Grassley-Baucus bill. Alec Vachon, a political analyst for Hamilton PPB, said, "The chances of a legislated moratorium right now look about as good as the United States ratifying the global warming treaty." Vachon added that because CMS will be reviewing payment levels to all providers, "[m]aybe the bigger story is who are going to be the winners and losers" in the funding shift (CQ HealthBeat, 5/12).

CMS

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