[Congressional Record Volume 142, Number 128 (Tuesday, September 17, 1996)]
[Extensions of Remarks]
[Pages E1623-E1624]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 THE HOSPITAL SELF-REFERRAL ACT OF 1996

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Tuesday, September 17, 1996

  Mr. STARK. Mr. Speaker, I am pleased to introduce the Hospital Self-
Referral Act of 1996.
  Previously, I have sponsored legislation that restricts physicians 
from self-referral because this practice leads to overutilization and 
increased health care expenses. This legislation is designed to rectify 
a similar problem.
  Today, nonprofit hospitals, for-profit hospitals, and large health 
care conglomerates have acquired their own posthospital entities such 
as home health care agencies, durable medical equipment businesses and 
skilled nursing facilities so as to refer discharged patients 
exclusively to their own services. As a result, many nonhospital based 
entities have seen inflows of new patients completely halted once a 
hospital acquires an agency in their service area.
  The effects of this self-referral trend are harmful. Hospitals that 
refer patients exclusively to their own entities eliminate competition 
in the market and thereby remove incentives to improve quality and 
decrease costs. Further, hospitals are able to selectively refer 
patients that require more profitable services to their own entity 
while sending the less profitable cases to the nonhospital based 
entities. The nonhospital entity is forced to either raise prices or 
leave the market. Worst of all, patients have no voice in deciding 
which entity provides the services.
  This legislation remedies the problem by leveling the playing field. 
First, hospitals will be required to provide those patients being 
discharged for posthospital services with a list of all participating 
providers in the service area so that the patient may choose their 
provider.
  Second, hospitals must disclose all financial interest in 
posthospital service entities to the Secretary of Health and Human 
Services. In addition, they must report to the Secretary the percentage 
of posthospital referrals that are made to their self-owned entities as 
well as to other eligible entities.
  This legislation does not hinder a hospital's ability to offer its 
own services. It merely guarantees that all providers will have an 
opportunity to compete in the market. Most importantly, it guarantees 
that patients will have choice when selecting their provider.
  Attached is a letter that typifies the current problem in the home 
health services market.

                                        Idaho Home Health Inc,

                                     Pocatello, ID, July 24, 1996.
     Re Medicare and Medicaid patient steering.

     D. McCarty Thorton, Esq.,
     Chief Counsel, Office of the Inspector General, Washington, 
         DC.
       We understand you are interested in receiving information 
     about Medicare and Medicaid patient steering. We own a 
     Medicare and Medicaid state licensed home health agency that 
     began twenty (20) years ago, and offer the following 
     examples:


                         a. idaho falls, idaho

       In 1993 we opened a branch office before the local hospital 
     offered home health. We received Medicare and Medicaid 
     hospital home health referrals on a regular basis. Once the 
     hospital opened their home health agency in

[[Page E1624]]

     1994 our Idaho Falls office has not received a single 
     referral from the hospital in more than three (3) years. We 
     also inquired of the other home health agencies in the area 
     and they all indicated they too have not received a single 
     home health referral from the hospital from the hospital for 
     years.
       In 1995 we were given minutes of a meeting wherein the DNS 
     at the hospital instructed the nursing staff to refer only to 
     the hospital's home health agency. We interviewed and have 
     recorded conversations with post hospital home health 
     patients who state they were never given a choice of 
     providers. We ever had one of our own employee's family 
     member request our agency upon hospital discharge and they 
     were still admitted to the hospital's agency.


                          b. montpelier, idaho

       We opened our home health agency there in 1992. The only 
     local hospital opened their home health agency in 1994. 
     Between 1992 and 1994 we received hospital referrals on a 
     regular basis. Since 1994 not another agency in Montpelier, 
     including ours, has received a hospital home health referral.


                        c. american falls, idaho

       We opened our agency there in 1994. The hospital opened 
     their home health agency in 1995. For nearly two (2) years we 
     received hospital home health referrals on a regular basis. 
     Since the hospital opened their agency not another home 
     health agency in American Falls has received a hospital home 
     health referral.


                          d. blackfoot, idaho

       We opened our agency there in 1992 and received regular 
     referrals from the physician owned Blackfoot clinic. In 1995 
     the doctor owned clinic opened a home health agency. Since 
     they opened their own agency, we have not received a single 
     home health referral. Each doctor owns more than 5% and each 
     doctor signs home health certifications. We advised HCFA and 
     our intermediary of this fact years ago and to date neither 
     has done anything to our knowledge.


                         e. soda springs, idaho

       We opened our office there in 1993. Between 1993 and 1995 
     we regularly received hospital referrals. Since Hospital X 
     opened its own agency in 1995 we have not, nor has any other 
     agency received a hospital home health referral.
       Traditionally, hospitals account for about thirty to forty 
     (30-40%) of home health referrals for free standing agencies. 
     Our experience proves in service areas, where hospitals have 
     opened their own agencies, that figure normally decreases to 
     about 0 to 1%. We have repeatedly tried to correct this 
     situation through meetings with hospital employees. We have 
     written the Governor, the Attorney General, met with state 
     and national congress people. We have written letters to 
     HCFA, our intermediary, and the OIG. To date, no one has 
     offered any assistance. Hospitals are reimbursed normally 
     twice what we receive from Medicare for the identical 
     service. Why the proper authorities fail or refuse to respond 
     to these facts is unknown. Had our agency provided the care 
     we would have saved millions of tax payor dollars.
           Sincerely,
                                                 William F. Bacon,
     Vice President and General Counsel.

                          ____________________