Congressman Stark’s legislation aimed at hospital-based agency self-referrals
1996 Congress adjourns without hitting agencies, but wait until 1997
Combating what he perceives as rampant fraud in the health care industry, Congressman Fortney (Pete) H. Stark is trying to add another weapon to his federal arsenal this one aimed directly at hospital-based home care agencies.
Stark, the ranking minority member of the Ways and Means subcommittee on health, pushed through legislation in 1994 and 1995 to restrict physicians from self-referrals. Now, he is gunning for hospitals, with the introduction at the close of the 104th Congress of H.R. 4100, "The Medicare and Medicaid Hospital Self-Referral Amendments of 1996." The legislation was designed to require Medicare-participating hospitals, as part of their discharge planning process, to notify patients of all post-hospital providers and services available in a given area. This would include home health care agencies, durable medical equipment providers, and skilled nursing facilities.
Discharge planners would be prohibited from referring patients to a specific provider.
Although Stark’s measure was not considered in the last session, it promises to be among legislation facing the 105th Congress, especially since the California Democrat is favored to win re-election in November, explains Eric Sokol, assistant director of government affairs for the Washington, DC-based National Association for Home Care (NAHC). Sokol’s office responded to Stark in a letter stating the association’s opposition to parts of the proposal. "I don’t think there’s an environment in Congress now to extend Stark [I and II]," he says.
NAHC, Sokol says, has "always supported beneficiary choice," but "we would have to assess our membership" over the disclosure and data collection aspects of the legislation. The legislation would require hospitals to divulge their financial interests in the home health agency and their referral patterns to the public. The U.S. Department of Health and Human Services (HHS) would collect the data from hospitals for release to consumers.
Who’s kidding whom?
"The effects of this self-referral trend are harmful," Stark reported to his colleagues in the House of Representatives in September. "Hospitals that refer patients exclusively to their own entities eliminate competition in the market and thereby remove incentives to improve quality and decrease costs."
The congressman asserted that "hospitals are able to selectively refer patients who require more profitable services to their own entity while sending the less profitable cases to the nonhospital-based entities. As a result, many nonhospital-based entities have seen inflows of new patients completely halted once a hospital acquires an agency in their service area."
A source in Stark’s office says the congressman’s concern over self-referrals "comes from an ongoing discussion we’ve been having with HCFA [Health Care Financing Administration]. Full integration [of services] might be a good thing, but we think we are being scammed."
Stark’s office has been working on a prospective payment system plan (PPS), the source says, under which "referrals might not be such a bad thing."
Disclosure would be required
Stark’s staff recently has focused attention on findings in an article, "Understanding Hospital Referrals to Home Health Agencies," which appeared in the fall 1996 Hospital & Health Services Administration’s The Journal of the Foundation of the American College of Healthcare Executives. The authors, Kathryn H. Dansky, RN, PhD, Mark Milliron, MPA, and Larry Gamm, PhD, studied 1990 discharge data of patients age 65 and over from 61 Pennsylvania hospitals.
Their study showed that patients discharged from hospitals that own home health agencies are 21% more likely to receive a referral for home care services than those discharged from hospitals that don’t own agencies.
Urban hospitals that own home care agencies were 57% more likely to discharge patients into home care than urban hospitals that did not own home care agencies. Rural hospitals owning home health agencies were only 32% more likely to send patients to home care than rural hospitals without home health ownership.
Additional provisions of Stark’s bill require hospitals having financial relations with post-acute care providers to disclose the nature of the financial interest, the number of beneficiaries discharged from the hospital requiring such services, and the percentage of beneficiaries who received such services from the hospital-related entity.
Such information must be reported to the Secretary of HHS, who would issue regulations specifying the precise implementation of the bill.
Despite its implications for hospital-based home health care agencies, Stark argues that the bill’s intent is to level the playing field, not to "hinder a hospital’s ability to offer its own services. It merely guarantees that all providers will have an opportunity to compete in the market. More importantly, it guarantees that patients will have a choice when selecting their providers."
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