Providers of partial hospitalization services are starting to complain about delays and denials of Medicare payments from HCFA, which has targeted those services as a possible source of Medicare overpayments.
Similar complaints have long been heard from providers of home care and inpatient psychiatric providers, which also have been targeted by HCFA.
Last month, a San Diego-based chain of partial hospitalization centers reported cash-flow problems, which it said stemmed from as much as $4 million in overdue Medicare payments.
The company, PMR Corp., said HCFA has denied about 80% of its claims in California since April, when some Medicare fiscal intermediaries began a "focused medical review" of partial hospitalization claims.
Focused medical reviews target services that HCFA believes are "at risk" of overpayments for inappropriate or unnecessary care.
"Our California hospitals have had abominable results" with Medicare payments since April, said Allen Tepper, PMR's president and chief executive officer.
At deadline, HCFA officials were not available to comment on why the agency, through its fiscal intermediary, was denying or holding up so many PMR claims for payment, as well as the reason for the denials and delays.
Reasons for denials.Often, Medicare-payment denials are based on intermediary determinations that care was inappropriate, unnecessary or provided in the wrong setting.
PMR specializes in partial hospitalization, which is day treatment for mental health patients who don't need inpatient care. PMR manages 17 hospital-based partial hospitalization programs, 10 of which are in California.
Mr. Tepper said his company is not alone in having problems with Medicare. He said he recently talked to a hospital administrator who received only $45,000 in payments on partial hospitalization claims of $3 million.
Medicare's current response to partial hospitalization claims is reminiscent of the situation in the late 1980s regarding home healthcare.
Partial hospitalization started booming a few years ago as payers began scrutinizing inpatient psychiatric admissions and providers began realizing that many patients didn't need to be hospitalized (Sept. 21, 1992, p. 27). As more insurers began paying for partial hospitalization, a handful of chains sprouted up.
A key link.In addition to the specialized chains, psychiatric hospitals began embracing partial hospitalization as a viable alternative to inpatient treatment and a key ingredient in the continuum of care (See chart).
It's not surprising that as admissions to partial hospitalization programs rose, HCFA started taking a closer look. That action mirrors events in the late 1980s when home-care reimbursements ballooned and HCFA's intermediaries began denying an increasing number of claims.
In that case, the National Association for Home Care, a Washington-based industry trade group, sued the federal government. The result was a 1988 court decision that required HCFA to clarify its policies, particularly its interpretation of medical necessity and part-time care.
Mr. Tepper said he and other partial hospitalization providers also may seek legal action.
Clarifying criteria.In the meantime,industry officials are trying to work things out. The American Association for Partial Hospitalization, Alexandria, Va., is talking to HCFA officials about a new "program memorandum" that will clarify admission criteria to partial programs. The memo is expected to be released later this month, said Mark Knight, AAPH's executive director.
"We're very concerned about the appropriate use of partial hospitalization, and that it is clearly distinguished from other types of supportive ambulatory programs," Mr. Knight said. He noted that instead of partial hospitalization, some patients may need a less intensive, and less expensive, form of outpatient services. Those types of criteria need to be clarified, he said.
Mr. Tepper agreed, noting that "HCFA has never published exacting criteria," which gives intermediaries a lot of latitude.
PMR's program also is different from many partial hospitalization programs because it treats the "severely and persistently mentally ill," whose length of stay averages 61 days. Some receive treatment for a year or more, Mr. Tepper said. Because of their illness, 98% of PMR's patients qualify for disability under Medicare.
About 40% of partial hospitalization programs have lengths of stay of 60 days or less, according to the AAPH. The remainder have longer average lengths of stay, the group reported.
Meanwhile, PMR has secured new financing to stabilize its cash flow. Last month, the company's bank increased its credit line to $2 million, and a group of company executives and shareholders put in $1.75 million in exchange for preferred stock.
For the first quarter ended July 31, PMR reported a net loss of $249,468, or 7 cents per share, compared with a profit of $59,784, or 2 cents per share, in the year-ago period. Revenues rose 41% to $6.1 million.