Originally created 07/13/97

Hospitals making money with `nursing homes'

ATLANTA -Half-empty hospitals struggling to make money while Medicare, Medicaid and private HMOs cut their payment rates are transforming vacant wings and floors into "nursing homes."

The practice is throwing deep-pocketed hospital chains into conflict with the nursing home industry and with Medicare regulators - who say hospitals may be double-dipping by charging twice for the same patient.

"If the hospital can move that person out of the in-patient unit sooner, they get the same amount of money whether that patient stays five days or seven days," said George Jacobs, Atlanta-based regional Medicare director for the Health Care Financing Administration.

"They get the same amount, but they don't have to give as much care," Mr. Jacobs said. "In a sense, they're getting it at both ends. It's sort of a double whammy on us."

The growing use of skilled nursing facilities is part of a nationwide move to shorten hospital stays and move patients into less expensive alternative settings.

But officials at HCFA and the U.S. General Accounting Office are alarmed at the rapid increase in nursing centers springing up inside hospitals - up 250 percent since 1986, while the industry as a whole has grown just 38 percent.

Pioneering the trend are hospital giant Columbia-HCA and nursing-home conglomerate Beverly Enterprises.

The for-profit health care chains teamed up in Georgia to obtain five state permits for what are sometimes called "hospitals-within-hospitals" at Columbia facilities in Atlanta, Augusta, Macon and Columbus.

Granted in December, the licenses are under appeal by the Kentucky-based Vencor hospital chain, which operates an extended-stay hospital in Atlanta serving mainly ventilator-dependent patients.

The appeal is scheduled to be heard later this month at the State Health Planning Agency, or SHPA.

Columbia officials insist the nursing units are providing a valuable service no different from that of other nursing homes, and that the complaints are merely sour grapes from competitors looking to regulators for protection.

"What you are doing is moving a patient from one level of care to a different level of care," said Jimmy Lewis, Columbia's vice president for Georgia operations. "That's a completely different service arena. There is not a duplication of service or any simultaneous double-billing going on."

The move toward hospital-based nursing homes is one of the industry's attempts to recapture money lost when Medicare and private insurance companies began clamping down on the length of hospital stays.

Tennessee-based Columbia, the nation's largest for-profit hospital network, owns 18 Georgia hospitals and has a contract to manage two others.

Though Columbia is known for its aggressive marketing, its Georgia hospitals struggle to maintain the national average of 45 percent occupancy, a figure Mr. Lewis said is falling about 2 percent a year.

For an in-patient hospital stay, Medicare and many private health-maintenance organizations now pay hospitals a fixed rate based on the category of illness, rather than paying per day of hospitalization.

That means hospitals can maximize profits by discharging patients quickly - part of the reason for falling occupancy rates, down nationally from 76 percent in 1981, according to industry figures.

Nursing homes, unlike hospitals, get paid by Medicare and its sister program, Medicaid, based on their self-reported costs of doing business. And Medicare will cover up to 75 days in a nursing facility after hospitalization - even if the nursing facility is part of the hospital.

Augusta's University Hospital, a private, non-profit institution, also received a state certificate in December for a 50-bed "special care unit" in conjunction with the for-profit Summit Hospital chain. That certificate also is under challenge.

To illustrate why the new unit would be so valuable, University officials told the state that 25 percent of its patient days in 1994 were eaten up by the sickest 3.6 percent of all patients.

The hospital said it lost $11 million by keeping that 3.6 percent of its patients in hospital beds beyond what their coverage would pay.

Congress is considering changing the Medicare rules so that the government would only pay for one admission, said Michael Kerner, president and chief executive officer of Columbia Augusta Medical Center. Currently, it will pay for the second admission to the "hospital within a hospital" unit, Mr. Kerner said. That second admission is really just a way to move the patient from the more expensive hospital bed to the less expensive, less intensive care nursing-home-style unit. And that's something that apparently Congress can't see, he said.

"I'm not sure Congress knows what it takes to take care of patients under the (Medicare payment) system they set up," Mr. Kerner said. That system pays a certain amount for a certain condition regardless of how long the patient may stay in the hospital, Mr. Kerner said.

Even if Medicare changes and won't pay for the second admission, these units could still help the hospitals that have them because of the cost reduction, Mr. Kerner said.

"We'd still be better off," he said. The cost can drop from thousands a day to hundreds a day for the same patient with the move, he said.

University Hospital is constructing a "sub-acute" unit for patients who are a little sicker than the ones that would go into the nursing-home-style units. But it would also like to put in a unit similar to the one Columbia has proposed. An appeal that held up approval of both those units will be decided Tuesday.

University has said the transfer would drop the cost of caring for the patient to around $350 a day compared to $1,400 in the acute care beds in the hospital.

And it is difficult for officials there to see how anyone could think the move is done to make money off these patients.

"They're so sick and their lengths of stay are so long," said Kathy Slade, assistant vice president in corporate resources at University.

Also, other companies would be leasing the space from the hospitals and running the units. Columbia Augusta would just get a flat rate per bed and would not receive anything for the patients it sent there, Mr. Kerner said.

Some regulators, however, question whether the special care units really offer a service that is different enough from a stay in a hospital bed to deserve a separate payment.

As part of this year's overhaul of Medicare, Congress is considering a change that would prevent hospitals from re-admitting the same patient to the hospital's nursing unit after getting paid for a hospital stay.

The Georgia Nursing Home Association is protesting the state's decision to grant expansion licenses - known as Certificates of Need - for the hospital units at a time when state Medicaid regulators are complaining there are already too many people staying in nursing homes at taxpayer expense.

"They will keep these patients in a hospital bed until their Medicare runs out and then transfer them to another setting. That's not right," said the association's executive director, Fred Watson. "These are the exact type of patients that normally go into the acute-care wing of a nursing home at one-third the cost."

SHPA executive director Pam Stephenson said her agency, which controls licensing for hospital and nursing home expansions, had no power to deny the special care applications because they did not involve large-dollar expenditures.

But Ms. Stephenson said the agency is considering rule changes to close what some regulators consider a loophole letting hospitals get extra money for their recuperating patients.

"Those special care units are purely a reimbursement issue," she said. "Our concern is, it may be a larger to-do than Medicare once thought."

Staff Writer Tom Corwin contributed to this report.


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