Specialty hospitals face further scrutiny

Lawmakers call for greater disclosure of physician investments and a closer look at patient safety at these facilities as the Medicare moratorium nears its end.

By David Glendinning, AMNews staff. June 5, 2006.

Washington -- The latest barrier stopping new physician-owned specialty hospitals from opening their doors is set to fall in a matter of months, but congressional critics of the facilities are already calling for new government rules on how they can operate.

The leaders of the Senate Finance Committee are asking the Centers for Medicare & Medicaid Services to require greater disclosure when physicians refer patients to specialty facilities in which they have an ownership interest. Such mandated transparency would include not only physician investments involved but also the quality and level of care that the patient would receive at the specialty facility compared with a full-service community hospital.

CMS in April took steps to address complaints that physician-owned specialty hospitals focus on providing more lucrative services and attract healthier, wealthier patients. Its inpatient payment rule proposes redistributing Medicare reimbursements to all hospitals over the next several years so pay is more accurately based on actual costs and severity of patient illness.

"Payments that accurately reflect resource needs create a level financial playing field for all hospitals and discourage hospitals from concentrating on certain services because they are more profitable, rather than because they are more needed by patients," said CMS Administrator Mark McClellan, MD, PhD, at a Senate Finance hearing last month.

Groups supporting specialty hospitals, such as the American Medical Association and the American Surgical Hospital Assn., endorsed the move despite the fact that such changes would decrease average Medicare payments to the facilities by nearly 10%.