March 06,2007

Grassley, Stark hold officials accountable for improper approval of specialty hospital in West Texas

WASHINGTON — Sens. Max Baucus and Chuck Grassley and Rep. Pete Stark are
asking more questions about how a specialty hospital in West Texas was allowed to participate in
the Medicare program despite an enrollment suspension on specialty hospital participation.  They
also want to know about this hospital, which Medicare now says doesn’t meet necessary
standards for hospital care, receiving accreditation from the Joint Commission, the entity the
government relies on to determine hospital fitness.

In a letter sent today to the Acting Administrator of the Medicare program, these
members of Congress pressed for information about the actions of a Medicare contractor in
making West Texas Hospital eligible for Medicare dollars and the response of Medicare officials
to the contractor’s failure to comply with the ban.  The Centers for Medicare and Medicaid
Services uses contractors to enroll Medicare providers and to process and pay over $300 billion
in claims annually.  “Given the significant responsibilities delegated to these contractors and the
enormous amount of federal money they manage, it is reasonable to expect that CMS would take
steps to ensure that their instructions are followed and that there is accountability among the
contractors when these instructions are not followed,” Baucus, Stark and Grassley wrote.

The lawmakers also wrote to the President of The Joint Commission for information
about its oversight of the West Texas Hospital.  An independent, not-for-profit organization, The
Joint Commission is the nation’s predominant standards-setting and accrediting body in health
care.  According to the Social Security Act, the Medicare program deems hospitals that are
accredited by the Joint Commission to be compliant with Medicare Conditions of Participation.
“CMS has a serious responsibility to keep Medicare beneficiaries safe, and in this
situation it is clear that they failed,” said Baucus.  “Congress passed a moratorium on
physician-owned specialty hospitals because of serious concerns that these facilities don’t meet
the safety standards and expectations hospitals should.  CMS imposed the ban on all new
facilities because it agreed with our concerns.  It is unacceptable to me that the contractor hired
by CMS failed to uphold their ban, and approved the West Texas hospital, but it is even more
outrageous that CMS has not sanctioned this contractor.  I also wonder why West Texas Hospital
failed to comply with four Medicare participation standards less than two years after it was
accredited by the Joint Commission.  I am going to keep very close watch to ensure that the Joint
Commission, CMS and the contractors it hires are holding physician-owned specialty hospitals
up to the high safety standards patients expect and deserve.”

“Medicare officials are responsible for making sure their contractors execute their
instructions.  When the contractors don’t meet their responsibilities, the ramifications are
enormous given what’s at stake, both for patients and taxpayers.  So it’s very necessary for
Medicare officials to aggressively oversee the contractors and hold them accountable when they
drop the ball,” Grassley said.

“The regulatory process Congress was told was in place to prevent specialty hospitals
from entering Medicare didn’t work,” said Stark. “Perhaps it should come as no surprise that the
Joint Commission – which accredited California’s Redding Medical Center despite years of
deadly heart surgeries – is partly responsible for this breakdown and for the death of a patient at a
physician-owned facility in West Texas. I expect more from CMS and its fiscal intermediaries.”

Baucus is Chairman and Grassley is Ranking Republican of the Senate Finance
Committee, which oversees Medicare and Medicaid.  Stark is the Chairman of the Ways and
Means Health Subcommittee.

The text of those letters, along with the text of the inquiry sent last month by Stark,
Grassley and Baucus regarding this hospital receiving Medicare payments while it was ineligible
for Medicare payments, follows here.  On January 23, a patient of the West Texas hospital died
after suffering respiratory arrest after spinal surgery and being transferred by ambulance to a local
community hospital when emergency services weren’t available at the specialty hospital.