HCFA delays enforcement of provider-based rule
But some are concerned about the rule’s wording
The Health Care Financing Administration (HCFA) has spoken on the subject of its controversial provider-based rule, and there’s good news and bad news. First, the good news. HCFA is giving hospitals at least until January to figure out what a provider-based service is and how it will affect their relationship with Medicare. The bad news is that the rules, as stated, will stand, meaning hospitals get a little more time but not much help with the language in the rule.
The rule states that any health care facility that meets specified criteria and is owned by a hospital can be deemed "provider-based," which means that Medicare payments are based on its standing as a department of the hospital and therefore are more generous. Those that fail to meet the qualifications are judged to be freestanding.
A September letter from then HCFA administrator, Nancy-Ann DeParle, says the delay in implementing the rule was set ahead to Jan. 10, 2001. Furthermore, some hospitals may have as much as a year to meet the new criteria, which will become due on the first cost reporting date after Jan. 10. For instance, if a hospital has a cost-reporting date of Jan. 11, 2001, that means the new criteria won’t apply until Jan. 11, 2002.
DeParle says that the "delay and phase-in process would allow a more manageable distribution of work for hospitals."
"In fact," says George Vasiliaukas, FAMFMA, director of reimbursement for Sisters of Charity Hospital in Buffalo, NY, "most hospitals probably have more than three months to sort things out," given the effect of cost-reporting dates. "The key thing," he says, "is that the cost-reporting date falls early in the year."
DeParle’s letter was in response to an Aug. 25 request from the American Hospital Association, as well as a request from the Association of American Medical Colleges, the Catholic Health Association, the Federation of American Hospitals, the National Association of Public Hospitals, Premier, and VHA Inc.
In their letter, the health care associations argued the new regulation does not reflect the intent of HCFA staff as expressed in a July 24 meeting. They wanted HCFA to reconsider some parts of the rule to more accurately reflect the agency’s own intent. The groups requested the delay because there are sections of the final rule they feel must be clarified for legal reasons.
The conflict arises over wording about provider-based status and who must seek it. The rule says that the providers who must apply under the rule include even hospital-based inpatient departments, if the departments provide any outpatient services. The organizations, however, claimed that HCFA told them this was not its intent. The organizations contend that this wording could lead to violations of federal regulations, including the False Claims Act.
"Hospitals are now placed in the untenable position of having to choose between compliance with a regulatory requirement that does not reflect agency intent, or relying on assurances that no penalties will attach for failure to comply," stated the group’s letter.
In addition to a delay in implementation of the rule, the same letter also asked for "ample time to identify the sections of the final rule that must be reproposed and those that need additional clarification but not new rule-making."
There’s confusion within HCFA, too’
DeParle claims the regulation is a correct reading of HCFA’s policy which specifies that any facility that provides services where payment rates are determined by the provider-based status must be subject to the provider-based rule. "The provider-based regulations were developed to help ensure that program payments and beneficiary copayments are appropriate while reassuring our beneficiaries that they are receiving health care services in appropriate facilities," she wrote in her letter. "If a physician practice meets certain criteria and is owned by a hospital, then that practice can be designated as provider-based’ and be paid under hospital outpatient department rates."
That’s too simple an explanation for most providers. "There is a lot of confusion," says Vasiliaukas. "And I expect there’s confusion within HCFA, too. I was sure, for instance, that any department or clinic within the hospital itself was no sweat. Now it’s not clear if that’s true.
"And one of my biggest fears is the 75% requirement," he adds, explaining that it "requires off-site practices and clinics to show that 75% of their patients come from the same service area as 75% of the hospital patients. So if you have a primary care center that falls outside the hospital’s service area, there will be a problem with reimbursements."
The signers of the letter requesting the delay wanted final rules to show "an accurate and understandable statement of the agency’s implementation of the law."
DeParle said that HCFA will be expanding its outreach and education efforts on the rule. The agency will use methods such as town hall meetings, training activities, and meetings with individual providers. She added that HCFA will post on its Web site answers to frequently asked questions and "further guidance to clarify the provisions of the provider-based regulation."
The provider-based rule was written to address results of an investigation by the Office of the Inspector General. The investigation determined that some hospitals were buying physician practices in order to get higher Medicare payments rather than to enhance the health care setting. HCFA’s response was to write the rule that determines whether providers are entitled to claim hospital payments while providing what is essentially an outpatient service.
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