Health Reform WK-EDGE Hospitals prepared to protect the status quo on self-referrals
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Tuesday, March 7, 2017

Hospitals prepared to protect the status quo on self-referrals

Self-referral to physician-owned hospitals results in overutilization and higher health care costs, the Federation of American Hospitals (FAH) and the American Hospital Association (AHA) warned in a letter to Congress, opposing new legislation which would roll back self-referral restrictions. The letter specifically opposes H.R. 1156, the ‘‘Patient Access to Higher Quality Health Care Act of 2017," which would change current law to permit more self-referral to physician-owned hospitals.

Referrals. The letter challenges referral arrangements where physicians refer patients to hospitals in which they have an ownership interest. Social Security Act (SSA) Section 1877 (the Stark Law) places a prospective ban on such arrangements because of their adverse quality and cost impacts. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), section 6001, enhanced the protections of SSA Section 1877 by limiting a Medicare exception to the prospective ban. However, some lawmakers and groups like the Physician Hospitals of America (PHA) are proposing to alter the status quo to allow the self-referrals the ACA section prohibited, a reversal which the FAH and AHA say would "harm patients, community hospitals and local businesses."

Impact. The letter points to an analysis that compared the performance of non-physician owned full-service community hospitals with physician-owned hospitals. The analysis revealed that physician-owned hospitals:

  • cherry-pick patients by avoiding Medicaid and uninsured patients;
  • treat fewer medically complex patients;
  • enjoy all-payer margins nearly three times those of non-physician owned hospitals;
  • provide few emergency services—an important community benefit; and
  • are penalized for unnecessary readmissions at 10 times the rate of non-physician owned hospitals.

Opposition. The FAH and AHA letter points out that the organizations are not alone in their opposition to bills like H.R. 1156. The letter notes the U.S. Chamber of Commerce’s long history supporting the ban on self-referral to physician-owned hospitals. The FAH and AHA letter cites a 2014 letter from the Chamber of Commerce that urged Congress to preserve Section 6001 of the ACA because the law was successfully working to limit utilization and costs. The FAH and AHA agreed with that sentiment and noted that by cutting back on excess, the current law protects patients, businesses and taxpayers.

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