Freestanding ACCs face a Medicare windfall, but costs could skyrocket
Freestanding ACCs face a Medicare windfall, but costs could skyrocket
Outpatient clinics may get physician residency training dollars
Ambulatory care centers (ACCs) around the country could be the beneficiaries of millions of dollars in additional Medicare payments if a proposal currently circulating through the nation’s capital ultimately receives approval from Congress.
But the facilities, which include thousands of freestanding and hospital-based same-day surgery centers and family walk-in clinics, could see their costs skyrocket before they achieve any real financial benefit, according to industry critics.
The double-edged proposal involves the highly coveted payments that Medicare doles out to physician graduate medical education (GME) programs. The payments currently go mainly to teaching hospitals to help offset the exorbitant cost of physician residency training.
In April, the Washington, DC-based Institute of Medicine (IOM), an influential government-funded panel, issued a raft of recommendations for reforming the way Medicare funds GME. Among them, the group suggested extending the program to potentially lower-cost settings such as "ambulatory health centers, managed care organizations, and children’s hospitals."
And President Clinton’s proposed 1998 budget echoes the idea. It contains language intended to cut direct GME costs by opening the program to non-hospital providers, which could include ambulatory surgery centers (ASCs).
However, if approved by Congress, full implementation could be phased in immediately or be several months away from commencement.
Four main factors are fueling these efforts:
• The federal government currently pays out a whopping $6 billion annually in direct and indirect payments to about 1,300 medical centers nationwide. The payments go to train residents in specialties ranging from pediatrics to oncology.
• Policy-makers are troubled by the program’s runaway costs and have questioned whether a true need exists for so many specialists in an era of managed care. Annually, the hospitals train about 100,000 residents at an average cost to Medicare of about $60,000 per year.
• But at some facilities, direct payments run as high as $240,000 per resident, according to the IOM. And there are no limits to the number of residents in training at most facilities.
• The total amount of direct payments alone has jumped by 53% in five years to $2.14 billion in 1996. (Indirect payments are much higher and cover a broad range of technical expenses paid through the hospital’s cost report.)
May see fewer hospital stays
"Opening the program to ambulatory settings may result in far fewer expensive hospitals and would be a reasonable response with so much of medical care now being rendered in ambulatory sites," says Roger Herdman, MD, the IOM study director who coordinated the recommendation committee’s work.
But lacking specifics, industry leaders give the idea mixed reviews. "We’re not hearing the whole story," says William H. Wenmark, RN, president and chief executive officer of NOW Care Medical Centers in Wayzata, MN.
"It sounds good, but let’s look at the details. Whenever the government steps in, life seems to get more difficult," says Wenmark, who serves as president of the National Association For Ambulatory Care based in Wayzata.
As yet, there are no details to the plan, which raises concerns for some providers. "Will there be specific regulations for [ACCs]? If so, one would hope there will be consultations with the industry on these issues," says Susan Gallagher, RN, JD, executive director of Surgery Center of Waltham (MA). Gallagher is president of the 16-member Massachusetts Association of Ambulatory Surgery Centers.
If and when ACC-specific regulations are promulgated, they would most likely be issued by the Health Care Financing Administration (HCFA). And they would have to address a variety of economic and operational concerns that, Gallagher and others say, could make the proposal unfeasible for many providers.
Chief among them would be:
• Cost.
"Costs could quadruple for ASCs. Payments would have to offset increases," says David J. McIntyre, MD, medical director of McIntyre Eye Clinic and Surgical Center in Bellevue, WA.
At teaching hospitals, residency training typically consumes three to four times as much in physical resources than hospitals without residency programs, says McIntyre, who is director of governmental relations with the San Diego-based Outpatient Ophthalmologic Society.
McIntyre says 40% of a typical ASC’s costs are driven by labor, which could skyrocket beyond that level at smaller, less efficient independent facilities.
• Effects on efficiency.
Up until now, ASCs have successfully marketed themselves to patients and insurers as efficient alternatives to inpatient surgery. Gallagher asks: What effect will residency training have on efficiency? "We would have to set aside certain operating rooms and create special schedules for residents that won’t interfere with other business," she adds.
Gallagher’s facility has permitted podiatry residents to assist surgeons in an agreement with nearby Cambridge Hospital. However, the ASC carefully restricts the residents’ role and notifies patients of their limited participation.
Details, details
• Payment adequacy.
Gallagher asks: Will making these allowances be worthwhile without any assurance that payments will be enough to compensate for the logistical complexities? McIntyre believes that the program, which is likely to be voluntary, will not reap a profit for ASCs.
"Most won’t make any extra money," he predicts. "The extras will be absorbed by the cost of running the program."
• Payment methodology.
Another as yet unanswered question involves the way HCFA will pay ACCs. The agency presently compensates teaching hospitals for direct payments based on a complex formula using data based on the 1984 Medicare cost reporting year. The per-resident calculation is weighted to reflect the number of teaching hours spent on each resident, administrative overhead, faculty salaries, and other teaching expenses incurred by the hospital.
But with ACCs, HCFA presumably also would have to base the calculations on other ACC-specific parameters such as average OR time and the current eight-tiered Medicare ASC payment system.
• Qualifying standards.
One already-known stipulation is that participating ACCs would have to meet minimum accreditation standards. Teaching hospitals are required to adhere to rules adopted by the Accreditation Council for Graduate Medical Education in Chicago. The standards cover virtually every clinical specialty from cardiology to podiatry in meticulous language.
But meeting accreditation criteria may not be such a hurdle, says Herdman. "Standards are already moving toward broader settings in response to the changing nature of the delivery system," he adds.
And like Surgery Center of Waltham, ACCs are already providing rotation hours for residents at no charge under informal agreements with local hospitals, notes Wenmark. "Many of us are already doing this. Now, the government wants to pay us, but taxpayers can save their money," Wenmark adds.
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