Feds taking closer look at hospital-owned practices

Billing habits will be surveyed more closely

Integrated systems can expect closer scrutiny of hospital-owned physician practices as a result of a recent Department of Health and Services Office of Inspector General (OIG) report alleging many of these groups are overcharging Medicare.

Inspector General June Gibbs Brown contends that half of the hospitals investigated improperly labeled their physician practices as outpatient departments, even when the doctor’s office was located nowhere near the hospital. That allowed them to take advantage of differences in Medicare outpatient payment schedules between hospital-based claims, which receive higher reimbursement, and physician office-originated claims.

All practices to be treated as freestanding

Brown’s Sept. 20 OIG report recommended the Health Care Financing Administration:

• treat all physician practices as freestanding to eliminate hospital overcharge of Medicare;

• only pay hospital-owned practices according to its physician fee schedule;

• have hospitals report all purchases of physician practices and clinics;

• require hospitals to declare how the costs of such facilities are represented on cost reports;

• require hospitals to treat all physician practices they own as separate entities for billing purposes, except for such special situations as where a clinic has for a long time been located in a hospital building.

Medicare’s Deputy Administrator Michael Hash, however, disagrees with Brown’s position, saying the complicated nature of a hospital’s relationship with its physician practices makes the IG’s proposal impractical.

Hash, instead, wants to clarify Medicare rules governing when physician practices may be treated as integrated with a hospital and seek new legislative authority to punish any attempt to evade the rules.