By Cherilyn G. Murer, JD, CRA
As health care continues to focus on outpatient settings as primary venues for delivery of care, there is renewed interest in the long-recognized Medicare entity known as a comprehensive outpatient rehabilitation facility (CORF). A CORF is a recognized provider of services paid by Medicare on a fee schedule basis. CORFs were established by Congress in 1980 with final regulations issued in 1982. The regulations define a CORF as a “nonresidential facility that...is established and operated exclusively for the purpose of providing diagnostic, therapeutic, and restorative services to outpatients for the rehabilitation of injured, disabled, or sick persons by or under the supervision of a physician.” The CORF program has not significantly changed since its inception, other than a provision in 1987 to allow for off- site billing for physical therapy, occupational therapy, and speech-language pathology. CORFs A CORF is simply a federal designation that allows services to be billed to Medicare, essentially making the CORF certification a means of reimbursement for services provided in these facilities. CORF certification does not define programs, rather it allows for multidisciplinary services to be reimbursed based on a fee schedule including nursing, social services, respiratory therapy, and drugs/biologicals, in addition to the traditional services of physical therapy, occupational therapy, speech-language pathology, and psychology. However, the most recent change relating to CORFs is the result of considerable activity within Congress and the Centers for Medicare and Medicaid Services (CMS) (formerly the Health Care Financing Administration [HCFA]) that has brought about several regulatory changes. According to a recent HCFA Program Memorandum instructing CORFs on the billing of drugs, biologicals, and supplies, drugs and biologicals will no longer be reimbursed on a cost basis. Effective April 1, 2001, payments for drugs and biologicals are made according to the lower of the billed charge or 95% of wholesale price, with a differentiation made between single-source drugs or biologicals and multi-source drugs or biologicals. Further, supplies should not be billed separately. They are included under practice expense in the Medicare physician fee schedule and should be billed accordingly. ASCS Another venue that has experienced change since the passage of the Balanced Budget Act (BBA) is the ambulatory surgery center or ASC. An ASC is a distinct entity that provides various outpatient surgical services to patients not requiring inpatient hospitalization. It can be operated under common ownership, under licensure or control of a hospital, or as an independent or freestanding entity. Properly licensed ASCs are reimbursed under the Medicare program for facility services that are provided in connection with a covered surgical procedure. Before November 1999, physicians had to be cautious of investing in ASCs due to restrictions placed on them by the anti-kickback statute, which prohibits the knowing and willful offer or payment of remuneration to induce referrals or in return for purchasing or recommending the purchase of any item or service payable by a federal health care program. However, the Office of Inspector General (OIG) established a safe harbor provision for ASCs, which was published in the Federal Register on November 19, 1999. This provision essentially acts as a relaxing of Stark, the physician self-referral law, with respect to physician ownership of ASCs. The ASC safe harbor has four specific categories: surgeon-owned ASCs; single-specialty ASCs; multi-specialty ASCs; and hospital/physician ASCs. The safe harbors protect a narrow band of transactions from prosecution under the anti-kickback statute if certain, albeit very strict, standards are met. Although the four categories of protected transactions provide physicians with investment opportunities in ASCs, each category has the fundamental requirement that a physician investor comply with the one-third practice income test. Under this test, physicians must derive one-third of their medical practice income for the previous year from procedures that must be performed in an ASC setting. The underlying rationale for the test is to ensure that ASC investment represents a logical extension of physicians’ practices and not a means to profit from improper referrals. The 1999 regulations tend to be skeptical of joint ventures between hospitals and physicians or physician groups. This is in part a product of the OIG’s belief that such joint ventures are often susceptible to fraud and abuse. Nevertheless, safe harbor protection was extended to hospital/physician ASCs under limited circumstances, for example, if the hospital is not in a position to make or influence referrals to the ASC or to the ASC’s investors. IDTFs Unlike ASCs, rules describing physician ownership or investment in an independent diagnostic testing facility (IDTF) are not as clearly delineated. The classification of IDTF was established by federal regulation in October 1997 to clarify ambiguities surrounding the operation of the independent physiological laboratory (IPL). The next year, pursuant to regulations published in the 1998 Fee Schedule and Payment Policies for Physicians’ Medical Services, the IDTF replaced the IPL classification as a Medicare-certified entity licensed to perform diagnostic tests. An interesting issue is whether an IDTF may be owned by a physician-owned hospital. Stark prohibits certain indirect financial relationships between physicians and health care entities furnishing designated health services (DHS) to which physicians refer. The ownership of IDTFs by physician-owned hospitals may arguably create a prohibited indirect financial relationship between the physician and IDTF. HCFA has yet to release the final rule on this matter. However, in January 1998, HCFA published proposed regulations interpreting and implementing Stark II, and on January 4, 2001, HCFA published the first portion of the final rule with a 90-day comment period. The second portion of the final rule, including provisions for physician ownership and investment interests in health entities, is expected to be published shortly. Although physician-owned hospitals interested in owning an IDTF would be wise to wait until the publishing of the final Stark rule, there is indication that it may be possible for physician-owned hospitals to take advantage of the opportunities afforded them by IDTF ownership. LTACHs Today, an effective health care system must have within its continuum appropriate venues of care to minimize revenue losses and the detrimental effects of the prospective payment system (PPS). The long term acute care hospital (LTACH) is one of these venues that serve patients who require long lengths of stay and highly skilled nursing care with access to technologically advanced therapies, but no longer require an acute level of care. Ideally, an LTACH operates within a total health care system to complete the full care continuum while providing a venue of care where the patient can be treated more cost-effectively for an extended length of stay. Patients in LTACHs generally fall into one of two categories: rehabilitation patients or chronically ill patients. At present, LTACHs are excluded from PPS. However, in the near future, they will be reimbursed under PPS. Although likely based on a diagnosis-related group (DRG) system, the system will be modified from the one currently used by acute care hospitals to account for the severity of illness and higher risk of mortality found in LTACH patients. One overwhelming regulatory misunderstanding is that a not-for-profit health care system cannot own an LTACH if it is a hospital within a hospital. HCFA recognizes that a facility may qualify for exclusion as long as it meets the criteria, even if owned by the same entity as the hospital that it shares a building or campus with. A separately operated hospital is not ineligible for exclusion solely because it and the host facility are under common ownership. Congress did not intend to deny availability of this key venue to health systems. Rather, Congress was sensitive to mandates that would inhibit a hospital within a hospital to be treated as a unit. The SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) was signed into law on December 21, 2000, and has extensively affected LTACHs. BIPA brought about a number of revisions to the Outpatient Prospective Payment System (OPPS), as well as containing numerous provisions affecting inpatient hospital payment policies. With respect to LTACHs, BIPA provided for a 2% increase to the wage-adjusted 75th percentile cap on the target amount for LTACHs effective for cost-reporting periods beginning during FY 2001. This new legislation requires a revision to the cap on the target amounts applicable to LTACHs that were subject to the 75th percentile cap. Note that the 25% increase to the target amount under BIPA 2000 is applicable only to LTACHs, and not to other excluded hospitals as defined by the act (eg, psychiatric, rehabilitation, pediatric, and cancer hospitals and units). This venue of care still offers the most flexibility, adaptability, and reasonable reimbursement for a patient population quickly becoming underserved but growing as the graying of America continues. The past 4 years have proven a dynamic period in health care with few areas left unaffected. CORFs, ASCs, IDTFs, and LTACHs are a small representation of the many health care entities changed since the passing of the BBA. As patient care enters the 21st century, we must remain poised for ever greater challenges and vigorous change with our attention focused on providing patients with the highest level of care possible within the confines of available financial and human resources. Cherilyn G. Murer, JD, CRA, is CEO and founder of the Murer Group, a legal-based health care management consulting firm in Joliet, Ill, specializing in strategic analysis and business development. She can be reached at (815) 727-3355 or via the Web: www.murer.com.
