Senators Grassley (R-Iowa) and Baucus (D- Montana) have introduced a bill at the federal level that would permanently exclude specialty hospitals from the “whole hospital” exemption in physician self-referral law. The exclusion would not apply to specialty hospitals already in operation or determined by HHS to be “under development” prior to 11/18/03. The legislation, known as the Hospital Fair Compensation Act of 2005, would also allow gainsharing between hospitals and physicians, or “coordinated care incentive arrangements” and order an evaluation or recalculation of DRG weights. The legislation is a development in an ongoing debate between community hospitals and specialty hospitals in around the country that offer services such as orthopedics and cardiac care and benefit in part from referrals from the physician investors. In January 2005, the Medicare Payment Advisory Commission (MEDPAC) recommended that Congress extend the current 18-month moratorium on physician self-referral to specialty hospitals, now set to end June 8. MEDPAC had suggested that Congress impose a new 19-month ban, through January 1, 2007, to allow more time for consideration of this issue.
The American Medical Association (AMA) testified to a Senate subcommittee and indicated that in their view specialty hospitals provide quality care to patients by offering new choices, and this hospital competition should not be stifled. The AMA stated that they believe that competition is vital to ensuring high quality, cost-effective health care for America’s patients. Further the AMA called for an end to the moratorium on physician referrals to specialty hospitals, and called for changes in hospital payments to more accurately reflect the cost of care and to eliminate reliance on higher paying services to subsidize other care.