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Even as Congress struggles with how to pay for health-care reform, the
White House keeps doing it its best to accentuate the positive. Last
week, Vice President Joe Biden hosted the country's three largest
hospital trade groups as they announced they will accept $155 billion
in Medicare and Medicaid cuts over the next 10 years. It's all part of
an inspiring storyline, the idea that everyone is doing their part to
make this most ambitious undertaking a reality. But no one actually
thinks that the hospitals — or for that matter other key players like
pharmaceutical manufacturers or doctors — are giving up something for
nothing. On the contrary, any health-reform package passed by Congress
will likely deal a major blow to an upstart competitor of many
hospitals.
Buried in the 850-page House health-reform draft is a provision that
could in effect ban further construction of doctor-owned, for-profit
specialty hospitals and prohibit existing ones from expanding. (The
provision would prevent new facilities from receiving any Medicare
payments and would limit changes to current facilities.) Senators
Charles Grassley and Max Baucus, who lead the body's powerful Finance
Committee, have been vocal critics of the doctor-owned specialty-
hospital model and the industry expects similar language to be
included in any upcoming Senate health-reform bill as well. Doctor-
owned specialty hospitals would "wither on the vine," says Molly
Sandvig, executive director of the industry lobbying group Physician
Hospitals of America. "Any business that can't grow or adjust to the
market won't be around too long."
Specialty hospitals that focus on providing care for children or
cancer patients have long existed, but the target of the House
legislation is something else entirely — for-profit health-care
facilities owned by doctors that perform some of the most lucrative
medical procedures in fields like orthopedics and cardiology. There
are now some 220 such facilities operating mostly in the South and
Midwest — up from 110 in 2001 — generating some $40 billion in annual
revenue. According to Sandvig, more than 80 additional facilities are
currently under development.
While these places are known as specialty hospitals, most do not
resemble acute-care, all-purpose community health-care institutions.
For one thing, they tend to sell themselves on the promise of comfort,
if not luxury, with at least a few offering wine with gourmet meals
and on-campus hotels for friends and family. More importantly, about
half don't have any kind of emergency department and of those that do,
more than half have only one bed available, according to a 2008 report
from the inspector general of the Department of Health and Human
Services. Even more troubling to critics is the fact that, despite
being physician-owned, only about 30% have a doctor on site at all
times, and about two-thirds actually tell staff to call 911 in case of
an emergency, according to the same report.
This has created a dangerous situation, according to critics. The
inspector general's report came about after a 44-year-old spinal-
surgery patient at a doctor-owned specialty hospital in Texas — the
state with the highest number of such facilities — developed breathing
problems and died, despite being taken by ambulance to a larger
community hospital. The staff had called 911 after noticing the man's
respiratory function was poor, but there was no doctor present to
help. And just last month, a female patient at the physician-owned
Colorado Orthopaedic and Surgical Hospital died after she became
unresponsive following surgery and was transferred to a community
hospital. The facility has suspended all outpatient surgeries and the
state health department has ordered the hospital to change its
protocol in order to have a board-certified emergency doctor on site
at all times.
As disturbing as those incidents are, the more widespread concern
about the newfangled hospitals is money. Although there is not ample
hard data yet available to prove that specialty hospitals take a large
bite out of community hospitals' bottom lines, a quick scan of the
list of the common procedures performed at the highly focused
institutions suggests just that. Orthopedic and cardiac care bring in
some of the highest margin reimbursements from insurers, money
community hospitals use to cover the cost of low-margin or money-
losing services like burn units, neonatal care and treating the
uninsured. When healthier, fully insured patients migrate away from
community hospitals to specialty facilities, their reimbursements go
with them. Overall profit margins at specialty hospitals, sometimes as
high as 30%, dwarf those of community hospitals. Plus, specialty
hospitals don't typically treat many Medicaid patients, which bring in
some of the lowest reimbursements available.
"When these specialty hospitals come in, they take out the better
reimbursed cases, the easier ones with less complications, and they're
able to benefit financially by skimming the cream," says Rick Pollack,
executive vice president of the American Hospital Association
Perhaps an even more pressing problem in the context of health reform
is the risk of overutilization of services. According to a 2006 report
from the federal Medicare Payment Advisory Commission, just the
presence of a doctor-owned heart hospital in a community increases the
rate of cardiac surgery by 6% among Medicare beneficiaries. The
upshot, according to a House staffer involved in health reform, is
that "people are getting things they probably don't need." Plus, says
the staffer, "the community hospitals go to war, bulk up their own
specialty centers and all of a sudden you see these ads around town
that 'You should get your heart checked.'"
For their part, doctor-owned specialty hospitals say they're providing
more access to better quality care — and in some respects, this may be
true. Patient satisfaction rates at such facilities are generally high
and it's logical that a facility dedicated to just one or a few
specialties could operate more efficiently. "Rather than compete in
the marketplace they want to legislate us out of business," says Dr.
John Harvey, president and CEO of the Oklahoma Heart Hospital.
But it's the built-in conflict of interest that causes some patient
advocates to bristle. In effect, they contend, doctors double dip —
earning money from procedures as well as the overall operation of the
hospital, of which they are shareholders. That provides plenty of
incentive for physicians, who typically also work part-time at the
local community nonprofit hospital, to recommend their easy-to-treat
patients go across town to have procedures done at the private
hospital where the doctors are investors. The House bill would address
this issue by closing a loophole that has allowed doctors to send
patients to hospitals they had a stake in, so long as that hospital
served a rural population, or the stake was in a "whole hospital," not
just a wing or department; the Congressional Budget Office predicts
closing this loophole would mean fewer overall procedures, saving $1
billion in Medicare costs over ten years.
The controversy over physician-owned hospitals isn't actually new.
Representative Pete Stark, a Democrat from California, began a crusade
against doctor conflicts of interest more than two decades ago, and
successfully got legislation passed in 1989 that prohibited doctors
from, among other things, having a financial stake in labs that
performed tests for their patients. The Stark Law, as it became known,
has been strengthened over the years to include more facilities and
apply to Medicare and Medicaid payments. But the loophole allowing for
doctor-owned specialty hospitals has remained open despite repeated
attempts to close it. Now that the country is grappling with how to
reform the entire health-care system, Congress has another chance to
decide whether the costs of this kind of proprietary specialized care
are simply too high to bear.
http://www.51orders.com/
White House keeps doing it its best to accentuate the positive. Last
week, Vice President Joe Biden hosted the country's three largest
hospital trade groups as they announced they will accept $155 billion
in Medicare and Medicaid cuts over the next 10 years. It's all part of
an inspiring storyline, the idea that everyone is doing their part to
make this most ambitious undertaking a reality. But no one actually
thinks that the hospitals — or for that matter other key players like
pharmaceutical manufacturers or doctors — are giving up something for
nothing. On the contrary, any health-reform package passed by Congress
will likely deal a major blow to an upstart competitor of many
hospitals.
Buried in the 850-page House health-reform draft is a provision that
could in effect ban further construction of doctor-owned, for-profit
specialty hospitals and prohibit existing ones from expanding. (The
provision would prevent new facilities from receiving any Medicare
payments and would limit changes to current facilities.) Senators
Charles Grassley and Max Baucus, who lead the body's powerful Finance
Committee, have been vocal critics of the doctor-owned specialty-
hospital model and the industry expects similar language to be
included in any upcoming Senate health-reform bill as well. Doctor-
owned specialty hospitals would "wither on the vine," says Molly
Sandvig, executive director of the industry lobbying group Physician
Hospitals of America. "Any business that can't grow or adjust to the
market won't be around too long."
Specialty hospitals that focus on providing care for children or
cancer patients have long existed, but the target of the House
legislation is something else entirely — for-profit health-care
facilities owned by doctors that perform some of the most lucrative
medical procedures in fields like orthopedics and cardiology. There
are now some 220 such facilities operating mostly in the South and
Midwest — up from 110 in 2001 — generating some $40 billion in annual
revenue. According to Sandvig, more than 80 additional facilities are
currently under development.
While these places are known as specialty hospitals, most do not
resemble acute-care, all-purpose community health-care institutions.
For one thing, they tend to sell themselves on the promise of comfort,
if not luxury, with at least a few offering wine with gourmet meals
and on-campus hotels for friends and family. More importantly, about
half don't have any kind of emergency department and of those that do,
more than half have only one bed available, according to a 2008 report
from the inspector general of the Department of Health and Human
Services. Even more troubling to critics is the fact that, despite
being physician-owned, only about 30% have a doctor on site at all
times, and about two-thirds actually tell staff to call 911 in case of
an emergency, according to the same report.
This has created a dangerous situation, according to critics. The
inspector general's report came about after a 44-year-old spinal-
surgery patient at a doctor-owned specialty hospital in Texas — the
state with the highest number of such facilities — developed breathing
problems and died, despite being taken by ambulance to a larger
community hospital. The staff had called 911 after noticing the man's
respiratory function was poor, but there was no doctor present to
help. And just last month, a female patient at the physician-owned
Colorado Orthopaedic and Surgical Hospital died after she became
unresponsive following surgery and was transferred to a community
hospital. The facility has suspended all outpatient surgeries and the
state health department has ordered the hospital to change its
protocol in order to have a board-certified emergency doctor on site
at all times.
As disturbing as those incidents are, the more widespread concern
about the newfangled hospitals is money. Although there is not ample
hard data yet available to prove that specialty hospitals take a large
bite out of community hospitals' bottom lines, a quick scan of the
list of the common procedures performed at the highly focused
institutions suggests just that. Orthopedic and cardiac care bring in
some of the highest margin reimbursements from insurers, money
community hospitals use to cover the cost of low-margin or money-
losing services like burn units, neonatal care and treating the
uninsured. When healthier, fully insured patients migrate away from
community hospitals to specialty facilities, their reimbursements go
with them. Overall profit margins at specialty hospitals, sometimes as
high as 30%, dwarf those of community hospitals. Plus, specialty
hospitals don't typically treat many Medicaid patients, which bring in
some of the lowest reimbursements available.
"When these specialty hospitals come in, they take out the better
reimbursed cases, the easier ones with less complications, and they're
able to benefit financially by skimming the cream," says Rick Pollack,
executive vice president of the American Hospital Association
Perhaps an even more pressing problem in the context of health reform
is the risk of overutilization of services. According to a 2006 report
from the federal Medicare Payment Advisory Commission, just the
presence of a doctor-owned heart hospital in a community increases the
rate of cardiac surgery by 6% among Medicare beneficiaries. The
upshot, according to a House staffer involved in health reform, is
that "people are getting things they probably don't need." Plus, says
the staffer, "the community hospitals go to war, bulk up their own
specialty centers and all of a sudden you see these ads around town
that 'You should get your heart checked.'"
For their part, doctor-owned specialty hospitals say they're providing
more access to better quality care — and in some respects, this may be
true. Patient satisfaction rates at such facilities are generally high
and it's logical that a facility dedicated to just one or a few
specialties could operate more efficiently. "Rather than compete in
the marketplace they want to legislate us out of business," says Dr.
John Harvey, president and CEO of the Oklahoma Heart Hospital.
But it's the built-in conflict of interest that causes some patient
advocates to bristle. In effect, they contend, doctors double dip —
earning money from procedures as well as the overall operation of the
hospital, of which they are shareholders. That provides plenty of
incentive for physicians, who typically also work part-time at the
local community nonprofit hospital, to recommend their easy-to-treat
patients go across town to have procedures done at the private
hospital where the doctors are investors. The House bill would address
this issue by closing a loophole that has allowed doctors to send
patients to hospitals they had a stake in, so long as that hospital
served a rural population, or the stake was in a "whole hospital," not
just a wing or department; the Congressional Budget Office predicts
closing this loophole would mean fewer overall procedures, saving $1
billion in Medicare costs over ten years.
The controversy over physician-owned hospitals isn't actually new.
Representative Pete Stark, a Democrat from California, began a crusade
against doctor conflicts of interest more than two decades ago, and
successfully got legislation passed in 1989 that prohibited doctors
from, among other things, having a financial stake in labs that
performed tests for their patients. The Stark Law, as it became known,
has been strengthened over the years to include more facilities and
apply to Medicare and Medicaid payments. But the loophole allowing for
doctor-owned specialty hospitals has remained open despite repeated
attempts to close it. Now that the country is grappling with how to
reform the entire health-care system, Congress has another chance to
decide whether the costs of this kind of proprietary specialized care
are simply too high to bear.
http://www.51orders.com/