Leaders of the specialty hospital movement say the guidance issued by the CMS on Friday, while incomplete, at least gives physician owners of the dozens of facilities being planned a way to find out if they will be impacted by the 18-month Medicare payment moratorium.
"All in all, it's helpful," says Michael Lipomi, president of the American Surgical Hospital Association, a trade group representing the industry, and CEO of Stanislaus Surgical Hospital in Modesto, Calif.
What Lipomi likes about the guidance is, first, that it does no more harm to specialty hospitals than was done by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, to which it refers.
The act was signed into law Dec. 8 last year, placing a ban on Medicare payments to physician owners of any new surgical hospitals. The moratorium on payments was made retroactively effective to Nov. 18, 2003. Facilities that were either in operation or under development prior to Nov. 18 were exempt from the moratorium under a grandfather provision of the act.
The CMS guidance also appears to give developers some wiggle room for surgical hospital projects that might not meet all four points of a test of eligibility for the grandfather exemption, Lipomi said.
In making that determination, the guidance says the CMS will consider whether a hospital prior to Nov. 18 had: 1) architectural plans completed, 2) funding received, 3) zoning requirements met and 4) necessary approvals from state agencies received.
The guidance says: "We recognize that, in some cases, it may not have been feasible to complete all four of these steps. Thus, while all of the factors will be considered, we expect to make case-by-case determinations."
Lipomi said, "It appears they understand the practical aspects of development. You could be well down the road and not have one of those things due to local regulations."
Lipomi said he also likes the idea of a process outlined in the guidance by which developers unsure of their status regarding the grandfather clause could seek an advisory opinion from the CMS.
James Grant, ASHA's president elect and chief operating officer of National Surgical Hospitals, says his firm has three facilities under development and one in which "it's a little unclear whether it meets the test" for inclusion under the grandfather clause.
Grant, who is in Washington today for what ASHA is billing as its first annual legislative conference and Capitol Hill vists, said he met with CMS officials about the procedures for obtaining an advisory opinion and was told applicants were likely to receive an opinon in less than 90 days.
Still, Grant said, the definition of what constitutes a specialty hospital under the act remains loose even after the clarification.
"It really didn't provide the clarity that we hoped it would," Grant said.
Scott Becker, a Chicago attorney specializing in surgical hospital development, estimated 30 to 50 hospitals with physician investors are riding that bubble, and he was unsure whether the advisory opinion route is a blessing or a curse. He was skeptical of the promise in the guidance that "CMS will make every effort to expedited the issuance of . . . advisory opinions."
"Right now, a lot of people have spent millions of dollars to get into the ground and get started," Becker said. "A lot of people will think they need to get an advisory opinion. You could have months of delay to get a decision."
Both Becker and Lipomi said the moratorium has effectively stopped development of any more new physician-owned specialty hospitals until the moratorium is lifted.
"In the hospital business, it's hard to be in business without Medicare," Becker said.
Meanwhile, Lipomi said, "A lot of (acute-care) hospitals look at this as an opportunity to start their own projects. It should make it clear to the politicians that this (surgical hospital development) isn't a bad thing, but they (acute-care hospitals) just didn't think of it first."