St. Helena is a critical access hospital in Clear Lake, California. It is essentially an emergency room. Critical access hospitals frequently serve rural areas without easy access to a larger medical facility. They may have up to 25 beds and must either discharge patients or transfer them if they require care for longer than 96 hours. Nonemergency room specialists play a vital role in stabilizing patients for transfer. In addition, under California licensing requirements, all hospitals must have on-call access to these kinds of nonemergency room doctors, including obstetricians and cardiologists, for example.
A little town versus a complicated federal reimbursement scheme
A quick Google search of Clear Lake, California suggests that it’s a little town with a nice lake and pretty good fishing. There’s also a garden club and an apparent problem with crab bandits. But the health of the good citizens of Clear Lake has now also become implicated in a complicated fight with the Department of Health and Human Services about Medicare reimbursement rates.
Medicare Part A reimburses, at a rate of 101 percent, all reasonable costs that critical access hospitals incur while providing inpatient and outpatient services to Medicare beneficiaries. The law did not initially cover the cost of any on-call doctors. It was later amended however, to extend coverage to reasonable compensation and related costs for emergency room physicians who are on call. As typically interpreted, the expansion does not reach the costs associated with nonemergency room physicians.
St. Helena did not argue that the law and regulations were misapplied. Rather, the hospital challenged the regulations, themselves, arguing that they were “arbitrary and capricious.” This is the magic phrase for challenging administrative action.
The Administrative Procedure Act (APA) requires courts to “hold unlawful and set aside agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” This process, known as “arbitrary and capricious review,” has gone through many interpretations since the enactment of the APA. These are difficult cases to bring because of the deference that courts generally give to the actions of administrative agencies.
It was relatively unsurprising, therefore, that the DC Circuit court upheld the earlier District Court decision. The regulations stand, and Medicare will continue not to reimburse cost of nonemergency specialists at critical access hospitals.
But the end result is troubling. It seems to place the heaviest financial burden on those least able to afford it.
Cui bono – who benefits?
There is certainly an argument for sound fiscal management of public money and the conclusion that follows that Medicare should only spend the American taxpayers’ dollars for what is necessary. No frills, allowed. But the services of doctors at critical access hospitals – even if they are not, strictly speaking, emergency room physicians, seems a little different.
Nobody goes to the emergency room if they have another choice. But what if the baby starts to come early--maybe way too early? What if the person who has been ignoring some shortness of breath suddenly goes into a full-fledged heart attack? The OB-GYN or the cardiologist better get there fast. California’s licensing scheme for hospitals goes a long way toward insuring that this can happen.
But then who pays? That’s the problem.
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Sadly, there’s really only one answer. Patients must pay.
Let’s recall, though, that these were the folks who were putting off care in the first place, perhaps at least in part, because of cost. Delaying care can make outcomes worse and more expensive for everyone.
Ultimately, the cost to Medicare of caring for a child with a birth injury or long-term management of someone with heart failure may be many times greater than the cost of reimbursing critical care access hospitals for paying nonemergency care doctors for on call time. The right answer in the short term could be the wrong one in the long term.