The dispute between Ozarks Community Hospital Inc. and the Centers for Medicare and Medicaid Services seems to have ended – but OCH may never look the same.
OCH CEO Paul Taylor attempted to appeal a mid-2016 CMS ruling that triggered hospital department closures and layoffs. But CMS on Sept. 6 issued new legal interpretations to its rules, and Taylor six days later filed a motion dismissing his appeal.
“It’s a good thing for the industry,” he said of the rule changes, noting OCH never sued CMS for losses or punitive damages.
OCH’s facility at 2828 N. National Ave. lost its federal hospital status when CMS officials determined it did not meet the requirements to bill Medicare as a hospital. Consequently, OCH in July 2016 stopped offering inpatient, emergency room and operating room services at its north-side center and laid off 200 of its 520 employees.
The dispute centered on the interpretation of Social Security Act Section 1861(e), which requires that entities receiving Medicare payments under the more lucrative hospital pricing structure are “primarily engaged in providing ... inpatients diagnostic services and therapeutic services for medical diagnosis, treatment and care of injured, disabled or sick persons, or rehabilitation services for the rehabilitation of injured, disabled or sick persons.”
But Taylor said the definition of “primarily” was open to interpretation by CMS inspectors who told OCH it had too few overnight patients, compared with its outpatient numbers. Taylor said he tried to adjust policies to satisfy the inspectors, but the expectations were unclear.
“You can have an aggressive surveyor in one case … and then [in] the exact same situation a different surveyor may look at it differently. Well, that becomes an arbitrary and subjective standard – and the industry can’t do that,” he said.
After repeated requests to CMS for clear-cut rules, Taylor said he was still unsure how to remain compliant.
“At one point CMS said ‘primarily’ means ‘more than.’ Well that would mean 51 percent. So that means you’re providing at least 51 percent inpatient services compared to your outpatient services. Well there are very, very few hospitals in this country that would pass the test if that’s true,” Taylor said, noting it also was unclear what CMS was measuring to come up with the percentage – patient days in the hospital, revenue or Medicare billing. “Fifty-one percent of what?”
When OCH lost its ability to bill Medicare for hospital services, Taylor decided those departments needed to shut down immediately. Even if OCH was able to fight the decision and win, he said, it would have taken years.
The facility stayed open, as a clinic, and used most of the vacated space for nonhospital services, Taylor said. It still accepts Medicare for its remaining practices.
Although OCH couldn’t save its hospital services, Taylor said it could help the industry by pressuring CMS to improve its practices. So Taylor, as a practicing attorney, combated CMS’ decision by requesting an Administrative Law Judge Hearing with the Civil Remedies Division of the Department of Health and Human Services Departmental Appeals Board.
“I was doing the appeal primarily because CMS’ approach with us was wrong,” he said. “They wouldn’t define the rule. They wouldn’t say how much inpatient volume we needed to have given the volume of outpatient that we were doing.”
In mid-2015, the most recent year available, OCH’s inpatient visits totaled 10, compared to outpatient visits of 43,667, according to Springfield Business Journal reporting.
CMS officials contacted by Springfield Business Journal declined to supply Medicare reimbursements for a specific hospital.
According to CMS’ online searchable database, OCH recorded 19 hospital inpatient discharges with average Medicare payments of $10,812. All discharges were for a single procedure labeled “major joint replacement or reattachment of lower extremity without major complications or comorbidities.”
“The system is Byzantine,” said Dave Dillon, vice president of public and media relations for the Missouri Hospital Association in Jefferson City. “Explaining it is always difficult.”
The updated rules are a justified move, he said, and will help calm concerns for other administrators.
“Having an objective standard is important, rather than having it be subjective to what ‘primarily involved in patient care’ means,” Dillon said. “Although it’s too late for the Springfield community, at least now they defined a standard. So other hospitals can understand that and will react to that.”
According to the CMS memorandum released this month, the agency now details the specifications considered when determining if a hospital is primarily engaged in inpatient care. Most notably is the minimum number of patients that stay the night, on average, which now is clarified as two. It also compares the number of inpatient beds to the number of operating rooms, emergency department bays, surgery outpatient beds and overnight nurses.
Inpatient hospital Medicare insurance covers hospital services, including semiprivate rooms, meals, general nursing and drugs as part of inpatient treatment, according to CMS’ website.
No going back
Even with rule adjustments, OCH likely will not get back into the hospital business, Taylor said.
The space formerly used for OCH’s inpatient, emergency and operating room services could be repurposed within six months as a 20-bed psychiatric hospital – which Taylor said is not subject to the same survey regulations. The new service may dedicate a large portion of beds to geriatric patients, which he said would differentiate it from competitors.
According to its website, OCH operates what it calls the “main hospital campus” in Gravette, Arkansas – with a 25-bed inpatient floor and a 24-hour emergency room – as well as 21 clinics in Arkansas, Oklahoma and Missouri.
In the past year, the health system has added five new clinics, including this year’s acquisition of four Elk River Health Services Inc. clinics in McDonald County. In June, it reported having 409 employees.
“We like where we are now, in those clinic operations,” Taylor said. “The clinics are healthy, and they are doing well and they are growing. They are just different now.”
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