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Second Opinion

Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

Ways and Means Committee Holds Hearing on Competition in Medicare

May 22, 2015—The House Ways and Means Health Subcommittee held a hearing May 19 titled, “Improving Competition in Medicare: Removing Moratoria and Expanding Access,” which largely focused on proposed legislation regarding physician-owned hospitals.

Chairman Kevin Brady (R-Texas) opened the hearing stating, “Today we're going to explore how much competition exists in Medicare: its impact, benefits and savings for Medicare patients as well as the potential for improving Medicare access and choices through more competition. We're also going to hear about two ideas to make Medicare more responsive to seniors' needs while also driving down costs and expanding access.”

He highlighted two proposals to improve competition in the Medicare Fee-For-Service (FFS) program, including expanding seniors' access to local physician-owned hospitals and improving the way Medicare currently administers the Durable Medicare Equipment (DME) benefit.

Chairman Brady also mentioned that “going forward, continuing the discussion we have today, we’ll also be looking at issues of physician shortages, disparities in rural health care within Medicare, as well as looking at improved programs on inpatient, outpatient and other hospital payment systems.”

Ranking Member Jim McDermott, M.D., (D-Wash.) disputed the chairman’s description of the proposals saying, “Unfortunately, the proposals that we will hear this morning won’t control costs. Instead, they are designed to appease the very interests that benefit from waste in the system and contribute to higher healthcare spending.”

Witness testimony was heard from: American Hospital Association President and CEO Rich Umbdenstock, American Enterprise Institute Wilson H. Taylor Scholar in Health Care and Retirement Policy Joe Antos, Methodist McKinney Hospital President Joe Minissale, and Barnes Healthcare Services (Valdosta, Ga.) President Robert Steedley, on behalf of the American Association for Homecare.

The discussion between subcommittee members and witnesses mainly focused on the belief that physician-owned hospitals often “cherry-pick” profitable patients, and incentivize physician self-referral, which drives utilization and higher costs.

Umbdenstock testified, “Physician self-referral represents the antithesis of competition. Instead it allows physicians to steer the most profitable patients to facilities in which they have an ownership interest, potentially devastating the health care safety net in vulnerable communities. Changing current law would not foster competition. Instead it would only allow these physicians to increase their profits.”

Umbdenstock further urged Congress “to stay with a program that limits the growth of these hospitals where they are highly selective and picking off the most profitable services.” Citing Medicare cost report data, he stated, “You notice the services on which hospitals like this focus. And I understand why, that’s where the payment is. Community hospitals don’t have that opportunity.”

Rep. McDermott asked Umbdenstock why physician-owned hospitals choose to only provide limited specialty services, to which he replied that it is important to recognize “the particular services limited service hospitals focus on, are the profitable services.”

Rep. Mike Thompson (D-Calif.) referenced the type of patients physician-owned hospitals serve, stating that according to CMS data, “in about 70 percent of physician-owned hospitals, fewer than 5 percent of admissions are Medicaid patients, and a little over 20 percent admitted no Medicaid patients at all.”

Rep. Thompson then asked Minnisale, “Your hospital, specifically in 2013, had 24 percent Medicare discharges and zero percent Medicaid discharges. Can you explain why these hospitals, in general, that are often located in proximity to full-service hospitals, aren’t treating Medicaid patients? Isn’t there a need to do this in underserved areas?”

Minnisale replied this was due to “geography,” adding “the Medicaid population tends to go to the closet facility due to transportation challenges, and we happened to build the hospital where there isn’t an indigent population.”

Contact:

Len Marquez
Director, Government Relations
Telephone: 202-862-6281
Email: lmarquez@aamc.org

Courtney Summers
Senior Legislative Analyst
Telephone: 202-862-6042
Email: csummers@aamc.org

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org