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States Should Abolish CONs, Says Government Report
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Publish Date: October 10, 2007   |  Tags:   News

Certificates of Need
States Should Abolish CONs, Says Government Report
Certificate of need programs don't successfully contain healthcare costs, and they pose serious anticompetitive risks that usually outweigh their purported economic benefits, according to a joint report issued last month by the Federal Trade Commission and Department of Justice. The 361-page report, Improving Health Care: A Dose of Competition, suggests that the 36 states with certificate of need (CON) laws abolish them.

"Market incumbents can too easily use CON procedures to forestall competitors from entering an incumbent's market," says the report.

"I think this report will impact discussions where [CONs are] at issue," says Scott Becker, Esq., CPA, a co-chairman of the healthcare division of McGuire Woods in Chicago. "It will be used mostly by those who already hold the position that CONs should go away, and it may sway some of those on the fence in states where CON is an issue."

The report also recommends eliminating other barriers to entry and competition. Interestingly, the report tacitly supports specialty hospitals.

"The vast majority of single-specialty hospitals - a new form of competition that may benefit consumers - have opened in states that do not have CON programs," says the report. "Indeed, there is considerable evidence that CON programs can actually increase prices by fostering anticompetitive barriers to entry. Other means of cost control appear to be more effective and pose less significant competitive concerns."

The FTC report comes on the heels of federal scrutiny of the Illinois Health Facilities Planning Board, which issues CONs in that state. According to the Chicago Tribune, the board is full of potential conflicts of interest because its members include two physicians, one insurance executive, a consultant and an administrator. One member of the nine-person board was recently accused in a lawsuit of conspiring with a construction company to extort business, according to the Tribune. In addition, a report by Illinois Auditor General William Holland criticized the board for inconsistent decision making.

"The governor summarily fired all nine appointees and is looking to appoint a new, five-person board," says Mr. Becker. "The [federal] report has led to more people asking to just get rid of it."

- Dan O'Connor

Accreditation
GAO Report Big Uh-oh for JCAHO
JCAHO failed to spot "serious deficiencies" at many hospitals it certified, and the accrediting agency should be subject to greater federal oversight, the Government Accountability Office says.

The report was released along with the news that Sen. Charles Grassley (R-Iowa) and Rep. Pete Stark (D-Calif.) have introduced legislation to give CMS oversight of hospital accreditation and the ability to "restrict or remove" JCAHO.

JCAHO's pre-2004 accreditation process missed more than three-fourths of the hospitals found by state survey agencies (SSAs) in CMS's annual validation survey sample to be deficient in Medicare requirements. JCAHO also did not identify about 69 percent of serious deficiencies in Medicare requirements found by SSAs, according to the report.

JCAHO calls statistics skewed because they do not measure the rate at which it detects deficiencies. JCAHO accredited 82 percent of U.S. hospitals in 2002, giving 85 percent of them positive grades. Those hospitals received $98 billion for Medi-care-covered services in 2002.

Insurance Fraud
Podiatrist's Billing Practices Under Investigation
A Fredericksburg, Va., podiatrist used a phony surgery center to bill for unauthorized facility fees for procedures he performed in his office-based practice, according to state and federal agents.

Authorities investigating fraud allegations against Marc J. Blatstein, DPM, executed warrants at his office and home. According to the affidavit, Dr. Blatstein billed insurance providers about $226,000 for unauthorized surgical facility fees from August 1999 through July. Fifty-six cases are under investigation.

Two ex-employees told investigators Dr. Blatstein set up a fictitious corporate name, Central Park Ambulatory Surgery Center, a post office box at the Parcel Plus business next to his office and a separate phone line to create the impression of a separate ASC, the affidavit says. Canceled checks issued by an insurance carrier show the checks were deposited into SunTrust Bank to accounts held by Central Park Ambulatory Surgery Center, Inc. and Marc J. Blatstein.

Records show Dr. Blatstein placed a yellow carbon sheet behind the white consent form patients were asked to sign. The white copy of the consent form listed "Dr. Marc Blatstein, LPM, PC" at the top; the yellow carbon copy listed "Central Park Amb-ulatory Surgery Center, Inc."

No charges have been filed as the investigation continues. Efforts to reach Dr. Blatstein for comment were unsuccessful.

- Kristin Royer

Inside The Numbers
Rent-a-patient Scam

  • 5,000: Number of patients who were recruited for surgeries that were billed at excessive amounts to their insurance companies
  • 46: Number of counts brought against Tam Vu Pham, Huong Ngo, and Lan Nguyen by the State of California for their roles in the scandal
  • $97 million: Amount billed to insurance companies between August 2002 and April 2003 by Unity Outpatient Surgery Center of Buena Park, Calif.
  • $14.2 million: Amount in fees collected by Unity during the same time frame using shell corporations to disguise their billing
  • 15: Number of minutes a septoplasty allegedly took for which Unity billed Blue Cross/Blue Shield $42,237
  • $5,000: Typical cost for a septoplasty

Source: Felony Complaint of California's Orange County Superior Court.

Fast Tracks\

Obesity May Now Be Considered an Illness
CMS has cleared the way for increased Medicare coverage of treatments for obesity, including bariatric surgery by changing the definition of the condition. Previously, because obesity was not viewed as an illness, Medicare did not have to consider paying for treatments for it. "The exact impact of the decision is hard to say at this point," says Georgeann N. Mallory, executive director of the American Society for Bariatric Surgery. Ms. Mallory warns Medicare didn't say obesity was a disease; it just changed the wording that said it wasn't. "But this decision gives us leverage. It looks as if Medicare is starting to recognize obesity as an illness and go in that direction."

JCAHO Announces 2005 Patient Safety Goals
Two new goals focus on reconciling medications across the continuum of care and reducing the risk of patient falls. You can view specific National Patient Safety Goals for ambulatory surgery centers and office-based practices and for hospitals at www.jcaho.org.

New Robotic Procedure for Prostate Cancer
You can now get reimbursed by Medicare for brachytherapy. In Phase II of the Stark regulations, issued in the March 26 Federal Register, CMS expanded the exception for radiology procedures performed during surgery to also include CAT scans, X-rays or ultrasound procedures performed immediately after surgery in order to confirm the placement of an item during the procedure. "These new regulations are a gift. Now both the independent diagnostic treatment facility and the ASC can get reimbursed by Medicare for procedures like brachytherapy," says Randy Tibitts, president of Prostate Centers of America, which has established many surgeon- and radiation oncologist-owned mobile prostate brachytherapy facilities. LDR brachytherapy (CPT 55859) is a Group 9 facility fee for the ASC.

Patient-safety Bill Gets Senate OK
The Senate unanimously passed a bill July 23 that would set up a voluntary system of reporting medical errors that would let doctors and hospitals make reports without fear of being sued. The Patient Safety and Quality Improvement Act is aimed at encouraging providers to report errors so that information can be used to improve patient safety. The bill must now be reconciled with the House version that passed last year.

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