For-profit hospitals could qualify for the first time as rural "critical-access" institutions under the provisions of Medicare-relief legislation working its way through Congress.
The move to ease qualifying standards for the rural hospital support program was one of numerous narrow measures tucked away in legislation that would roll back Medicare payment restraints enacted under the Balanced Budget Act of 1997.
Allowing for-profits into the 2-year-old critical-access program was one of several measures aimed at placating rural hospitals, which have been among the biggest protesters against budget-law cuts.
The critical-access hospital program allows rural hospitals to bill Medicare for reasonable costs for inpatient services rather than receiving the DRG payment other hospitals receive under Medicare's prospective payment system.
To qualify for the program, which was created under the budget law, a hospital must have 15 or fewer acute-care beds, be at least 35 miles from another hospital, provide 24-hour-a-day emergency care, keep inpatients no longer than 96 hours and have a referral arrangement with at least one other hospital.
So far, 56 of 2,200 rural hospitals have been approved as critical-access hospitals, according to HCFA. Another 26 applications are pending.
Although it's not clear why, the budget law also specified that only private and public not-for-profit hospitals could qualify. Some believe for-profits were excluded because the critical-access program evolved from a demonstration project under which Medicare was seeking to limit expenditures as it experimented with the new program.
"To me, there's no good, sound policy reason to exclude for-profit hospitals," said Tony Fay, vice president of reimbursement and government affairs with for-profit Province Healthcare Co., Brentwood, Tenn. Province owns 15 hospitals and manages 48, mostly in rural areas.
None of the major for-profit hospital companies operating primarily in rural areas own a hospital with fewer than 29 beds, according to American Hospital Association data.
By allowing those hospitals to downsize and bill Medicare on a reasonable-cost basis, they could improve their financial situations and perhaps become more attractive acquisition targets to buyers.
Linda Miller, president of Volunteer Trustees of Not-For-Profit Hospitals, criticized loosening the eligibility criteria.
Miller said for-profits see this as a way to make more money by buying hospitals that can be reimbursed on a reasonable-cost basis.
She said for-profits shouldn't qualify, because they are higher-cost providers than not-for-profits.