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Specialty Hospital Moratorium Bill Could Be DOA
Influential congressman promises to keep bill from leaving committee


A new bill could forbid doctors from referring Medicare or Medicaid patients to specialty hospitals in which the doctors have an ownership interest.

The Hospital Fair Competition Act of 2005 would bar such so-called "self-referrals." The bill's sponsors, Senate Finance Committee Chairman Chuck Grassley (R-IA) and ranking Democrat Max Baucus (D-MT), cite recent studies that show physicians only treat the least sick, and most profitable, patients in their own specialty hospitals. (See PBI, Vol. 6, No. 18.)

But the bill would "grandfather" existing specialty hospitals and allow them to operate under the current rules. The existing hospitals wouldn't be allowed to increase their physician investors or the percentage of each physician's individual investments, scope of services or number of beds or operating rooms.

The bill also would instruct the Department of Health and Human Services to set rules for so-called "gainsharing" arrangements, where hospitals reward physicians for delivering care more efficiently. Congress' current moratorium on physician-owned specialty hospitals is set to expire on June 8, and the bill would take effect on that date.

The Centers for Medicare and Medicaid Services opposes extending the current moratorium. But CMS agreed to halt approvals of new specialty hospitals for another six months while it studies payment options.

And at least one powerful legislator has called the Grassley-Baucus bill DOA. House Energy & Commerce Committee Chairman Joe Barton (R-TX) said he won't even mark up the bill, in a May 12 hearing on specialty hospitals.

As required by law, HHS issued its recommendations on reforming payments to specialty hospitals. HHS recommended:

* reforming the DRG system to make it less tempting for physicians to game the system between specialty hospitals and outpatient departments;
* reforming ambulatory surgery center payment rates to refine the "crude" nine-tier price structure and remove undue price differentials;
* looking more closely at whether new specialty hospitals really meet the definition of a hospital; and
* examining whether specialty hospitals are meeting all the Medicare requirements for hospitals, including the conditions of participation.

HHS expects to have revised its policies around specialty hospitals by January 2006.