Just days after White House officials promised to give hospitals some financial relief from a new Medicare payment system for outpatient care, another branch of the administration released a report that suggested hospitals may be abusing the former system.
Whether the latest report will spur the administration to reconsider helping hospitals is unclear.
HHS' inspector general's office said the two events are unrelated.
So say hospital lobbyists, but that didn't stop them from taking issue with the study's recommendations.
In a 24-page report released Sept. 20, HHS said Medicare may be overpaying hospitals for services provided by the physician practices the facilities have acquired.
Overpayments could occur if a hospital classified a practice as provider-based rather than freestanding. Provider-based practices can include overhead and operating costs in their annual Medicare cost reports, netting higher reimbursements for services.
However, if a hospital claims a practice as a freestanding physician office, payments for services are based only on a Medicare fee schedule.
The report said Medicare fiscal intermediaries don't have enough information about hospital-owned practices to ensure that the program is paying hospitals on the right basis.
"Medicare could be paying excessive amounts for services provided in the practice," according to the study.
HCFA reimbursed hospitals $548 million for outpatient clinic services in fiscal 1996. The report said as much as $86 million of that could have been overpayments for misclassified hospital-owned practices.
The findings advised HCFA to step up reporting requirements, eliminate the provider-based category, treat all hospital-purchased clinics as freestanding and seek legislation to sanction hospitals for failing to report physician practice purchases.
Carmela Coyle, the American Hospital Association's senior vice president of policy, said the association opposes the elimination of the provider-based category, because the payment regulations should reflect the way hospitals use the practices they buy.
HHS' report came out five days after White House officials said they're considering delaying a key provision of the new Medicare prospective payment system for outpatient care (Sept. 20, p. 12).
The PPS, scheduled to take effect Jan. 1, 2000, relies on a utilization adjustment factor, which would prevent hospitals from increasing their volume of services to compensate for reduced Medicare payments. The White House proposal would delay the use of that factor to lessen the financial hit on hospitals.