CMS Asks For Comments On Physician-Owned Hospital Regulation

April 17, 2017, Virgil Dickson, Modern Healthcare - The Trump administration wants to hear comments on restrictions that the Affordable Care Act placed on physician-owned hospitals.  On Friday, the CMS issued a proposed rule for inpatient hospitals that contained two requests for information.  

The first sought comments on the appropriate role of physician-owned hospitals within the delivery system.  The second asked which regulations should be rescinded.

For the first request, the CMS asked whether the current restrictions on the facilities affect healthcare delivery and what impact they might have on some patients.

The question was music to the ears of industry stakeholders who fought against the regulations.

"The current ban on physician-owned hospitals prevents Medicare patients, in many instances, from accessing the highest quality of care in their community," said Dr. Blake Curd, president of Physician Hospitals of America.

Groups such as the American Hospital Association and Federation of American Hospitals, which represent not-for-profit and investor-owned hospitals, respectively, have lobbied Congress hard against physician-owned hospitals following reports by both the Medicare Payment Advisory Commission and the Government Accountability Office that showed those hospitals cherry-pick patients needing treatments with high profit margins such as orthopedic surgery.

Hospital trade groups successfully lobbied Congress to include an amendment in the ACA that prevents physician-owned hospitals from expanding their existing facilities unless the HHS secretary deems it beneficial to the community. In order to qualify for Medicare or Medicaid payments, a physician-owned hospital needs approval from HHS.

The law also prohibits investors from increasing ownership stake in hospitals and prohibits providers from referring any Medicare and Medicaid patients to hospitals in which they hold any stake.

In the years since the law was enacted, studies have shown there was no cherry-picking of patients and that the ACA has slowed the rate of new physician-owned hospitals.

According to a 2016 Health Affairs study, physician-owned hospitals generate higher mean revenue per adjusted patient day than non-physician-owned hospitals, at $2,710 versus $1,201, respectively.

It's unclear what HHS could do to lift the restrictions since the ACA remains the law of the land, said Jeff Goldsmith, president of Health Futures, a Charlottesville, Va.-based consulting firm.

The AHA and FAH vehemently support the restrictions on phyisician-owned hospitals.  In February, the AHA reiterated its support after a bipartisan group of lawmakers introduced H.R. 1156, the Patient Access to Higher Quality Health Care Act, which would have lifted those ACA restrictions.

The rulemaking on Friday also asked which current regulations on the industry should be lifted.  Specifically, ones that reduce burdens for hospitals, physicians and patients, improve the quality of care, decrease costs and ensure that patients and their providers and physicians are making the best healthcare choices possible.

"There are a range of contradictory programs, conflicting incentives and other regulatory hurdles that hamstring providers from delivering quality, innovative care," Blair Childs, senior vice president of public affairs at Premier said in a statement after the rule.

The AHA had earlier made a request in a letter to then-President-elect Donald Trump.

It said the cancellation of Stage 3 of the meaningful use program should be a top priority because hospitals are shouldering the expense of upgrading electronic health records solely for regulatory reasons.

The final stage of the health IT program requires providers to send electronic summaries for 50% of patients they refer to other providers; receive summaries for 40% of patients who are referred to them; and reconcile past patient data with current reports for 80% of such patients.

It also asked for removal of hospital quality measures that track care in both inpatient and outpatient settings.  It claimed that those data are inaccurate and don't focus on solutions to improving care.

Toby Edelman, senior policy attorney at the Center for Medicare Advocacy said the quality measure request troubled her because the AHA did not suggest improvements or alternatives.

It's unclear how the Trump administration will use information gathered during the requests for information.  It said the CMS will not respond to comment submissions on the inpatient payment rule.