If HCFA has its way, many "hospital-within-a-hospital" subacute-care units could soon be history.
That's because the federal agency has proposed rule changes for the units that could make it more difficult for hospitals to develop and profit from them.
A hospital-within-a-hospital is a subacute-care unit developed within an existing acute-care hospital. However, unlike other hospital-based units, hospitals-within-hospitals are licensed as long-term hospitals and receive higher, cost-based reimbursements from Medicare.
Providers like to develop these units because they can utilize hospital overhead and medical and administrative staff without paying additional costs.
However, HCFA's proposed rule changes would prohibit providers from utilizing any of the hospital's overhead or staff in their units. Instead, it would require all hospital-within-a-hospital units to include a separate governing body, chief executive officer and chief medical officer.
It also requires these units to perform "basic hospital functions" separate from those functions performed by the acute-care hospitals in which they are based. The proposal, which was published May 27 in the Federal Register, would go into effect Oct. 1, barring any changes.
The purpose of the proposal, HCFA said, is to weed out hospitals that "try to abuse the prospective payment system by diverting all long-stay cases to the (hospital-within-a-hospital) unit, leaving only the shorter, less-costly cases to be paid for under the prospective payment system." Figures weren't available on how much the government is spending to support such units. However, officials have said the federal treasury could save $530 million over five years if it restricted all long-term-hospital licenses.
However, not all providers were disheartened by HCFA's proposal.
Ironically, subacute-care executives said the proposal could actually open new markets for providers specializing in managing hospital-within-a-hospital units.
"(The proposal) was a home run for us," said Bob Crosby, chairman and CEO of American Transitional Hospitals, a Franklin, Tenn.-based subacute-care provider. "We expect it to open and enlarge our existing market tenfold."
According to Mr. Crosby, the proposal will generate new opportunities for the company and others like it to contract with hospitals. ATH, which was purchased by Beverly Enterprises in April for about $33 million (April 18, p. 4), specializes in developing subacute-care units within existing hospitals. The company now has five units.
However, unlike the traditional hospital-within-a-hospital model, ATH merely leases space from hospitals. The subacute-care provider's medical and administrative staffs are separate from its acute-care landlord, Mr. Crosby said.