A three-judge panel of the 5th U.S. Circuit Court of Appeal in New Orleans vacated a lower court decision that reinstated the tax-exempt status of six-hospital St. David's Health Care System in Austin, Texas. The system is a joint venture between for-profit HCA and not-for-profit St. David's. Last year, U.S. District Judge James Nowlin in Austin ordered the Internal Revenue Service to reinstate the system's tax-exempt status, which the IRS revoked in 2000 (June 17, 2002, p. 8). On appeal from the IRS, the 5th Circuit said the lower court erred by granting summary judgment to St. David's because the case raised "genuine issues of material fact." It said, "If more than an insubstantial amount of the partnership's activities further noncharitable interests, then St. David's can no longer be deemed to operate exclusively for charitable purposes." The panel sent the case back to the lower court for trial.
Lawmakers target rehab rule
Nearly 300 members of Congress signed a letter urging the CMS to reconsider a rule revising the criteria that rehabilitation hospitals must meet to qualify for Medicare rehabilitation payments. In September, the CMS proposed requiring that 65% of admissions to an inpatient rehabilitation facility fall into one of 12 diagnostic categories for the facility to be reimbursed by Medicare's rehabilitation rates instead of the standard prospective payment system rates. Current rules mandate that 75% of patients fall into one of 10 diagnostic groups. Providers complain the new list of diagnostic categories still doesn't include a host of common conditions. As a result, providers say, some rehabilitation facilities would be forced to close.
System draws antitrust scrutiny
Advocate Health Care, Oak Brook, Ill., confirmed that it has received subpoenas from the Federal Trade Commission regarding Advocate Health Partners, a 2,200-member physician organization owned jointly by the system and the physician members. Advocate spokesman Dan Parker declined to elaborate on the content of the subpoenas, which he said were received in June. "There's nothing that suggests we've done anything wrong, and we are cooperating fully," Parker said.