Budget debate has stolen the spotlight, but beware ‘Freedom of Choice’ bill

It would mean fines, more paperwork for hospital-affiliated providers

While the debate over the recent budget agreement between congressional Republicans and the White House has crowded the news, another proposal, with ominous portents for hospital-affiliated home health agencies, almost got lost in the shuffle: the Patient Freedom of Choice Act.

But there it is, amid all the wrangling over Medicare spending cuts, the shift in the home health benefit from Part A to Part B, and the prospective payment system (PPS). Congressman Pete Stark (D-CA) has reintroduced his bill (HR 742) that seeks to guarantee Medicare and Medicaid patients being discharged from hospitals the right to choose providers of their post-hospital services.

A spokeswoman with the congressman’s office says the bill was expected to reach the floor for a vote this session. As Hospital Home Health goes to press, the proposal "is still in committee," the spokeswoman reports.

If enacted into law, the bill would force hospitals participating in Medicare and Medicaid to notify patients of the availability of all post-hospital providers in the area who wish to be listed. A hospital failing to comply with these requirements would be subject to a fine of up to $10,000 for each violation. Hospitals also would be required to report to the Secretary of Health and Human Services (HHS) the number and percentage of patients discharged to their own ancillary providers.

Although the law would go into effect 90 days after passage, the Secretary would have one year to issue implementing regulations.

Although most of the hospital-affiliated agency directors that Hospital Home Health talks with say they honor freedom of choice by informing patients of other providers at the time of discharge, Rep. Stark says there is a large gap between what is and what should be. His bill raises the hackles of home care directors who weary of being suspected of denying "rights" because they are affiliated with a hospital.

Most providers already defer to "patient rights." Many do it on the advice of lawyers or consultants, but others, like South Hills Health System Home Health Agency in Homestead, PA, have been doing it on their own all along. South Hills Home Health provides a list of local agencies, but the agency goes a step further, too. In compiling the list, the agency selects only those providers that are certified by the Joint Commission on Accreditation of Healthcare Organizations.

Why shouldn’t hospitals use their agencies?

Despite Rep. Stark’s proposal, which is no doubt well-intentioned, a question arises: Why shouldn’t hospitals refer to their own ancillary providers?

Thomas Hoyer, director of the Office of Chronic Care and Insurance Policy for the Health Care Financing Administration in Baltimore, suggests that hospitals have that right, at least as long as the Freedom of Choice bill isn’t law.

Hoyer, you will recall, has been at the center of the controversy surrounding the Stark II law, which addresses physicians’ relationships with home care entities. Stark II created some exceptions — and confusion — to the stipulations in 43 CFR 424.22, a 1983 federal regulation that disqualifies physicians from certifying care plans of Medicare patients at home care agencies where doctors have a significant financial interest. The regulation defines significant interest as doctors having 5% ownership or payment transactions exceeding a total of $25,000 a year. (See related story in Hospital Home Health, October 1996, p. 109.)

Stark II, however, says doctors can have a financial relationship such as a rental of space transaction with a home care provider and still certify care plans for that agency as long as the transaction was at fair market value and not related to referrals.

"Ultimately, we’ll do rules based on the Stark proposal," Hoyer told Hospital Home Health in a recent exclusive interview. "These will be consistent with the Stark laws. Bona fide physician employees of a hospital would be exempt [from Stark], as well as interns, residents, and other bona fide employees. They would be able to make referrals. But doctors who had ownership interest in hospitals would not."

On hospitals referring to their own agencies, Hoyer says, "It gets at competition in general. Should the government go out of its way to protect freestanding agencies? Are the independents, the mom-and-pops, going to be able to keep going in managed care and in networks?"

Hoyer asks, "Is it the right public policy to let the marketplace sort it out, or to have the political process protect freestanding agencies?

"Hospital referral is not fundamentally bad. It doesn’t break any rule."

Hoyer, whose job it is to watch over spending of Medicare tax dollars, goes on to say that "hospital-based agencies, the good ones, are not cheaper [than independents], but they do make fewer visits. One good thing is the hospital-based home health agency may have a quality advantage."

But Hoyer is quick to add that his job is to enforce HCFA regulations and federal legislation regarding Medicare.

"Are we a nation of laws or of men?" he asks.