By John Reichard, CQ HealthBeat Editor
August 9, 2006 -- Critics of doctor-owned specialty hospitals reacted favorably to aspects of a plan issued late Tuesday by the Medicare program to tighten oversight of the facilities, but they stuck to their view that the facilities should be banned.
The plan "is important," said Senate Finance Chairman Charles E. Grassley, R-Iowa, but "these steps alone won't unravel the web of conflicts that have been created by these limited-service hospitals, which cherry-pick patients based on dollars rather than diagnosis and put the well-being of both individual patients and the health care delivery system at risk."
Doctor-owned specialty hospitals limit themselves to certain procedures—cardiovascular surgery, for example—that according to critics are highly lucrative and siphon off patients from traditional hospitals they need to be able to offer services with low or no profit margins.
Similarly, the American Hospital Association, which depicts doctor-owned specialty hospitals as a threat to the survival of the traditional hospital, praised the plan's requirement that physician-owners disclose to patients their financial interest in the facilities.
"Patients have a right to know whether a conflict of interest may affect their care," said Thomas Nickels, AHA senior vice president.
Nickels also praised the Centers for Medicare and Medicaid Services plan for requiring the facilities to disclose what percentage each physician-investor owns and how much he or she is being paid. In cases where the percentage of profits received by a physician exceeds the percentage representing his or her ownership stake, CMS could prosecute the specialty hospital for violating laws barring kickbacks for referrals. But "given the growing evidence that financial interest may be overtaking patient interest, the AHA continues to believe physician self-referral to limited-service hospitals they own should be banned," he said.
Grassley and top Finance Committee Democrat Max Baucus of Montana had urged CMS to delay issuance of the regulatory plan, citing flaws in a survey on which the plan was based. Delaying the plan would have extended a CMS administrative moratorium on enrolling new doctor-owned specialty hospitals as Medicare providers. But CMS Administrator Mark B. McClellan defended the survey in a letter Tuesday to the two senators, blaming problems in the survey in part on a low response rate by hospitals. CMS declined to extend the moratorium.
The proposed regulations on doctor-owned specialty hospitals were among other regulatory proposals issued by CMS on Tuesday, including major payment revisions for physician, hospital outpatient, imaging, and ambulatory surgery center services (ASCs). Reactions on Wednesday were mixed.
AHA praised CMS for giving hospitals plenty of time to submit data on a variety of new performance measures the agency is establishing for fiscal 2008. But the association's vice president for policy, Donald May, faulted a CMS proposal that would reduce the amount of the payment increase hospitals get in fiscal 2007 for outpatient care if they don't report data on existing measures of the quality of inpatient care.
Quality measures should only affect payment for outpatient care if they specifically address outpatient care, he said, noting that a number of measures specific to outpatient care are in development. A fundamental principle of quality-based payment should be that "incentives are linked to the care provided," he said.
The CMS proposal overhauling payments to ASCs for 2008 also drew fire. Kathy Bryant, president of the Federated Ambulatory Surgery Association, said "we're extremely disappointed by the rate CMS is paying" in the proposal.
Bryant said ASCs accept the premise of the rule that they should be paid less than hospital outpatient departments because they are more efficient. But setting payments to ASCs at 62 percent of what hospital outpatient departments will receive in 2008 "seemed excessive to us," Bryant said.
"We had indicated we could live with 75 percent," a figure she said would have saved Medicare 25 cents of every dollar otherwise spent on doing procedures in the outpatient department.
Payments for some of the highest-volume procedures done by ASCs will see cuts in 2008 under the proposal, she said.
Payments would be trimmed 13 percent for upper gastrointestinal tract endoscopies involving biopsies and 10 percent for diagnostic colonoscopies, she said.
Also, because of differences between hospital outpatient departments and ASCs in the "bundles" of services CMS is including in payments for procedures, the savings delivered by ASCs won't be as apparent to patients, Bryant said.
On a positive note, CMS is proposing in 2008 to add about 800 more types of procedures it will pay for in ASCs—an increase of 25 percent.