Hospitals fight closing costly loophole

Federal panel: Congress should equalize payments to hospitals and doctors’ offices

12/15/2012 8:50 PM

12/15/2012 9:54 PM

In the convoluted world of Medicare billing, hospital-owned clinics can collect far more than independent physicians for routine office visits.

A federal panel that helps set Medicare policy is pushing to change that.

As hospitals buy more physicians’ practices, they’re increasingly billing for office visits. Typically, they collect about 80 percent more from Medicare for those visits than independent doctors can.

That trend could increase annual Medicare spending by $2 billion by the year 2020, according to the Medicare Payment Advisory Commission. Because Medicare patients are responsible for paying 20 percent of their doctor bills, patients also stand to see substantial increases in their medical costs.

MedPAC, an independent panel which advises Congress on Medicare policy, has proposed what some experts see as a common-sense solution. It wants to equalize payments to hospitals and doctor’s practices for office visits.

But hospitals have vigorously fought the proposal. In a letter to Congress, the American Hospital Association contends the MedPAC proposal would reduce access to care and prove “significantly damaging to beneficiaries and the providers on which they rely.”

Medicare already pays hospitals too little to cover costs, the association said.

“America’s hospitals have greater responsibilities and requirements than physician offices: requirements to treat all comers (regardless of ability to pay), 24-7 staffing requirements, and seemingly endless regulations from nearly a dozen different … agencies,” the hospital association wrote.

Hospital-based clinics also tend to treat sicker patients, the association said.

Others, however, argue that the physicians’ practices bought by hospitals aren’t usually staffed around the clock. And if they treat sicker patients, they can use the appropriate billing codes to collect more money, says Robert Berenson, an analyst at the Urban Institute’s Health Policy Center.

Treating Medicare patients doesn’t have to be a money-losing proposition for hospitals, some experts say. They point to studies by MedPAC, which have found that efficient hospitals are able to make a profit treating Medicare patients.

Congress has not acted on MedPAC’s recommendation.

It’s clear that hospitals have obligations to treat all-comers at all hours, said Berenson, a former MedPAC commissioner. But that, he said, doesn’t mean the suburban physicians’ offices that they own should be able to collect far more than independent practices for the same services.

“We have to close this loophole,” he said. “This has been known about for years. … It’s time to bite the bullet and do something about it.”

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