On the heels of recent questions about whether specialty hospitals harm the nation's health care system by effectively skimming off the most profitable patients comes a call for CMS to investigate whether these hospitals practice racial discrimination.
Three members of the House Ways and Means Committee -- Reps. John Lewis, D-Ga.; Charles Rangel, D-N.Y.; and Pete Stark, D-Calif. -- requested the investigation in a July 28 letter (PDF file: 6 pages / 1.2 MB. More about PDFs.) to CMS Administrator Mark McClellan, M.D., Ph.D.
Specialty Hospitals Under Fire Again
Lawmakers Ask CMS to Investigate Possible Discrimination
"We are deeply troubled by the growing segmentation of the health care delivery system in our country and the continued disparities experienced by people of color," the letter stated. Delivery of health services in the United States seems to be divided into two tiers -- one for those who either are healthy or have relatively good health insurance and another for those who have inadequate or no health insurance.
For persons in racial or ethnic minority groups, the letter said, this segmentation is magnified.
"Recent evidence from the (Government Accountability Office), the Medicare Payment Advisory Commission and the Centers for Medicare & Medicaid Services suggests that physician-owned specialty hospitals could be contributing to some of this segmentation by engaging in favorable patient selection," said the letter.
Specialty hospitals are defined as those that primarily or exclusively treat patients within no more than two major diagnosis-related group classifications or patients classified into surgical DRGs. The 100 or so specialty hospitals now operating or under construction in the United States -- many of them physician-owned -- have come under fire in recent years. See the table below for the primary reasons for this concern.
Specialty Hospital Pros and Cons
Under a loophole in the so-called Stark II law governing physician referrals of Medicare and Medicaid patients for inpatient or other services, physician-owners may self-refer to these hospitals. This practice, say opponents, creates a patent conflict of interest and unfair competition.
By focusing on patients needing services that generally are found to be more profitable and on those requiring surgical treatment, opponents say, specialty facilities leave community hospitals to shoulder the burden of providing less profitable health services and caring for the poorest, sickest patients.
Proponents counter by saying specialty hospitals take advantage of a convergence of financial incentives for physicians and hospitals, producing more efficient operations and better patient outcomes than do conventional community hospitals.
A previous news story from the Academy outlined the AAFP's support for extending the moratorium, as well as the AMA's stance in favor of ending it immediately.
Under a loophole in the so-called Stark II law governing physician referrals of Medicare and Medicaid patients for inpatient or other services, physician-owners may self-refer to these hospitals. This practice, say opponents, creates a patent conflict of interest and unfair competition.
By focusing on patients needing services that generally are found to be more profitable and on those requiring surgical treatment, opponents say, specialty facilities leave community hospitals to shoulder the burden of providing less profitable health services and caring for the poorest, sickest patients.
Proponents counter by saying specialty hospitals take advantage of a convergence of financial incentives for physicians and hospitals, producing more efficient operations and better patient outcomes than do conventional community hospitals.
A previous news story from the Academy outlined the AAFP's support for extending the moratorium, as well as the AMA's stance in favor of ending it immediately.
As part of the Medicare Prescription Drug, Modernization and Improvement Act of 2003, Congress imposed a moratorium on the nation's specialty hospitals to permit investigation into how they affect the nation's community hospitals and the services these community facilities provide.
According to the legislators' letter, a MedPAC analysis presented to the Senate Finance Committee last May showed that "physician-owned specialty hospitals tend to treat patients who are less sick -- and therefore more profitable -- than those treated at full-service community hospitals. The report also showed that these facilities tend to treat a lower share of Medicaid patients than the community hospitals in the same market."
Specifically, the MedPAC report found that 92.1 percent of patients discharged from cardiac specialty hospitals in 2002 were white, 3.6 percent were black, 1.7 percent were Latino and 2.6 percent were classified as "other." By comparison, 85.2 percent of cardiac patients discharged from community hospitals in 2002 were white, 9.6 percent were black, 2.2 percent were Latino and 3.1 percent were "other."
The legislators called on CMS to focus further analysis in several key areas, primarily dealing with self-referral patterns to physician-owned specialty hospitals, with special emphasis on the frequency with which minority patients are admitted to these facilities.
They also asked CMS to break down Medicare discharge data for physician-owned specialty hospitals by race and patients' insurance status.
Although the moratorium officially expired June 8, in May CMS announced plans to review and reform payment rates for inpatient hospital services and for services delivered at ambulatory surgical centers. The agency also will review its procedures for approving facilities applying to participate in the Medicare program.
Accordingly, CMS officials have said they will not review any new applications for Medicare reimbursement of specialty hospitals at least through the end of 2005. MedPAC has called for extending the moratorium until at least 2007.
