When it comes to specialty services, the government walks a fine line between access and cost.
Specialty hospitals say inpatient satellites are a bold experiment that promises to expand access and save money, which could benefit everyone. But HCFA worries satellites are being set up strictly to get more money out of Medicare.
On Oct. 1 HCFA acted on its fears, enacting regulations for satellite hospitals to ensure that they operate separately from their host hospitals.
The notion of independently licensed hospitals' sharing space isn't really new. Many long-term acute-care hospitals have been established inside general acute-care hospitals since 1993, when HCFA determined that general acute-care hospitals could not operate long-term acute-care units.
In its new rule, HCFA defined a satellite as "part of a hospital" that shares a building or campus with another hospital. The agency distinguished satellites from "hospitals within hospitals," which have one location that is entirely within another hospital.
The potential for abuse stems from the fact that hospitals that specialize in expensive and protracted cases-namely long-term-care, children's, cancer, rehabilitation and psychiatric services-are excluded from Medicare's prospective payment system.
Instead of being subject to the fixed case rates of prospective payment, those facilities are paid more generously based on their "reasonable costs," subject to a hospital-specific annual limit.
HCFA says it believes some specialty hospitals have sought to establish satellites to render services that should be billed through prospective payment.
For example, HCFA has said, host hospitals might transfer a patient prematurely to the satellite, thus double-billing for that patient. Or a host might transfer expensive patients to the satellite while keeping cheaper cases that generate a profit under prospective payment.
Moreover, HCFA contends some hospitals have sought satellite arrangements to avoid payment caps applied only to new rehabilitation, long-term-care and psychiatric hospitals under the Balanced Budget Act of 1997. It also warns that existing cancer hospitals might set up satellites to skirt a ban on new cancer hospitals.
Citing growing interest in satellite facilities, the agency fired a warning shot in May in the form of a proposed rule that would have effectively slashed payments at inpatient satellites by requiring them to accept reimbursement under PPS. Critics in the hospital industry said that would have rendered satellites unprofitable.
HCFA backed off the rule but did establish criteria for satellite hospitals. Namely, satellites must:
* Maintain admission and discharge records separate from those of the host hospital.
* Have beds that are physically separate from those in the host hospital.
* Be in proximity to the main facility, with direct day-to-day supervision by the main provider.
* Be serviced by the same fiscal intermediary as the hospital of which it is a part.
* Comply with requirements for cost reporting.
* Maintain the same patient-care characteristics of their parent facilities. For example, a children's hospital satellite must care primarily for patients under age 18.
* Be clinically and financially integrated with the main facility.
* Not add to the total bed count of the main hospital beyond pre-budget act levels. In other words, hospitals cannot increase their bed counts by opening satellites.
Additionally, satellites are subject to criteria established for all off-campus facilities, such as sharing the same management, governance and medical staff as their main facility.