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New Study Shows 'No Medicare Savings' if Congress Moves Against Physician Owned Hospitals.
Date:12/17/2009

OH cases to non-POH settings would be substantial.

CONCLUSION

In this Issue Brief we argue that the estimated savings from limiting POH growth are overstated because the costs of providing care in POHs is less than the costs of providing care in non-POHs. The study reaches two conclusions. First, for the same types of inpatient cases receiving the same treatment, a patient treated in a POH will cost the Medicare program on average $734 (4.6%) less than a similar patient receiving the same treatment in a non-POH. Second, for a subset of high-volume cardiac and orthopedic procedures performed at POHs and non-POHs in the same community, allowed Medicare charges for POHs were 6% less than allowed charges for nearby non-POHs

APPENDIX

Summary of Medicare Rate Setting Process(8)

Step 1 - Hospitals submit a bill for each Medicare patient they treat to their Medicare fiscal intermediary (a private insurance company that contracts with Medicare to carry out the operational functions of the Medicare program). Based on the information provided on the bill, the case is categorized into a Medicare Severity Diagnosis Related Group (MS-DRG), which determines how much payment the hospital receives.

Step 2 - The base payment rate is comprised of a standardized amount, which is divided into a labor-related and non-labor share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located and if the hospital is located in Alaska or Hawaii, the non-labor share is adjusted by a cost of living adjustment factor. This base payment rate is multiplied by the MS-DRG relative weight.

Step 3- If the hospital is recognized as serving a disproportionate share of low-income patients (DSH), it receives a percentage add-on for each case paid through the PPS. This percentage varies depending on several factors, including
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SOURCE Physician Hospitals of America
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