- Email: [email protected]
Physician-owned specialty hospitals in the USA
World Report
Physician-owned specialty hospitals in the USA Some doctors in the USA are leaving the stress of community hospitals to set up centres of their own. But angry hospital managers claim physician-owned centres cherry pick the insured and healthy, leaving community hospitals to deal with the rest. Nellie Bristol reports from Washington.
www.thelancet.com Vol 366 July 16, 2005
Situations like the one between BryanLGH administrators and NHI cardiologists are cropping up in communities throughout the USA. The tension has led to the establishment of about 100 physician-owned hospitals that specialise largely in cardiac, surgical, and orthopaedic procedures. Concerns about possible negative economic effects on community hospitals and the potential for overuse of health-care services when physicians own the institutions to which they refer patients have driven the issue to Washington, where lawmakers and regulators are now considering the future of the fledgling industry. Opponents of physician-owned specialty hospitals, which include two powerful hospital groups, are urging Congress to restrict the facilities. “Because physician owners tend to refer healthier, well-insured patients to the facilities they own, the full service community hospitals are left to provide essential services that are seldom self-supporting—emergency services, burn units, trauma care, and care for the uninsured”, says American Hospital Association executive vice president Rick Pollack. The groups are asking Congress to make hospitals subject to statutes that bar physicians from referring Medicare and Medicaid patients to facilities they invest in. Other health services are subject to the self-referral laws but hospitals are exempt. Banishment from such huge payers as Medicare and Medicaid would severely limit the specialty-hospital industry. Physician owners argue that specialty hospitals are more efficient, provide better quality care, and give higher patient satisfaction. Physicians enjoy working at smaller, more nimble institutions where they make the decisions. “We see something we can
do better by making a change, we meet tonight, tomorrow the change is implemented”, says Gard. “When you work through a hospital system, the bureaucracy takes a long time.” An 18-month moratorium on construction of new physician-owned cardiac, surgical, and orthopaedic hospitals was imposed by Congress in 2003 to allow lawmakers time to collect data on the facilities’ impact. The ban ended on June 8, 2005. Studies completed this spring show the facilities tend to treat healthier, less costly patients in more profitable payment categories, but that so far, community hospitals have not suffered as a result. They also show that quality at the facilities is as good as, or better, than that at full-service hospitals and that patient satisfaction is high. Responding to the findings, the Centers for Medicare and Medicaid Services (CMS), which runs the government health programmes, indicated that it will not approve any
Rights were not granted to include this image in electronic media. Please refer to the printed journal. www.photolibrary.com
In some ways, BryanLGH Medical Center is a victim of its own success. The 583-bed full-service, not-forprofit medical facility in Lincoln, NE, USA, had a remarkable mobile cardiac diagnostic programme in the 1990s, run as a joint venture between the hospital and Nebraska Heart Institute (NHI) physicians. The programme, with its fleet of eight vans, served a 48county area in this largely rural state. BryanLGH was the hub of the effort, providing acute-care services required by the network’s sickest patients. But with as many as 1400 cardiac procedures undertaken in a year, there came a point when the hospital could not keep up with its workload. Sometimes, the hospital was even forced to turn away patients, a situation Lincoln cardiologist and NHI member Joseph Gard found hard to take. “We tell patients that if you need something from a heart standpoint we’ll be there to take care of them and then we get the call that one of the patients is critically ill and has to be admitted and we have to say, ‘sorry we have no beds’. Emotionally that just seemed an unacceptable position to be in”, he says. Administrators attempted to placate the physicians in various ways, including plans for a US$200 million expansion project that would add 50 beds to BryanLGH. But 14 members of the NHI decided to build their own hospital anyway. The Nebraska Heart Hospital, a 63-bed cardiac-care facility, opened in Lincoln in 2003. With NHI physicians now referring many of their patients to their own facility, BryanLGH is down to 700 cardiac procedures a year and is scrambling to make up declining revenues. The mobile cardiac service was split into two competing programmes.
193
World Report
Rights were not granted to include this image in electronic media. Please refer to the printed journal.
additional physician-owned facilities to take part in the Medicare programme for 6 months. Further, it will instigate payment changes to negate incentives to treat healthier patients and will examine specialty hospitals to ensure that they meet the definition of a hospital, meaning that they provide primarily inpatient services. In a more draconian move, two leading Senate health lawmakers, Finance Committee Chairman Charles Grassley (R-Iowa) and ranking Democrat Max Baucus (D-Montana), recently introduced legislation that would enact the hospital lobby position and ban physicians from referring Medicare and Medicaid patients to new specialty hospitals in which they have an ownership interest. The bill could be considered later this year. No matter where government policy ends up, limited service hospitals expose weaknesses in the Medicare payment system and highlight questions about health-care services and the free market. They also reveal what seems to be a growing enmity between hospital administrators and physicians. “There’s a huge disconnection between physicians and administration at hospitals all across the country that is frustrating, bad for patients, bad for medicine and ultimately bad for hospitals”, says Tulsa, OK, neurosurgeon Steven Gaede. Gaede took on US$1·8 million in debt to finance his share of the Tulsa 194
Spine Hospital, feeling, like Gard did, that he could not take care of his patients to his satisfaction at the local community hospital. Gaede acknowledges that the spine facility “has to make money, the debt is going to get paid off”, but denies charges of cherry picking and over utilisation. He sees how they could be issues, but says they are problems not limited to specialty facilities. “Anybody can game any system”, he says. “I can tell you stories of people who are making far more money than I am that aren't part of a specialty hospital, that are simply overdoing surgery, and they’re working at a community hospital.” Ultimately, Gaede says, physicians are well paid professionals who need more motivation than just money to take on the financial risk and extra work of running their own hospital. “What everybody’s missing, I think, is that yes there are a few outliers who are all about money. But the vast, vast majority of physicians have huge amounts of inertia. We’re busy, we’re making decent money. Why would we take a bunch of risk to do something unless we absolutely believe in it with all our hearts?” Gaede asks. Physician investors will find a sympathetic ear among some influential Congressional Republicans who support free-market competition as a way of improving services. “Competition drives down cost and improves the quality of health care”, House Energy
and Commerce Committee Chairman Joe Barton (R-Texas) said at a recent hearing. “The rise of specialty hospitals will press traditional community hospitals to become leaner, faster and better.” Leaders on the House Ways and Means Committee say the hospitals are an indication that Medicare regulations and payments need to be reformed. Health subcommittee Chair Nancy Johnson (R-Connecticut) is looking into payments that reward collaborative efforts in patient care. The panel’s Chairman, Bill Thomas (R-California) is considering a review of physician-owner self-referral laws, which he says may be inadvertently stunting professional coordination. The facilities also raise a larger economic issue, Thomas says. If hospitals continue to lose the most lucrative services, at some point society and government would need to look at the question, “are the things left over worth doing and if they are to what extent are they worth doing to the point that society would pay for them?” he says. Bradley Sher, vice president, managed care/public policy for BryanLGH says that is exactly where his hospital will be if specialty facilities continue. He said his facility loses US$4 million a year on inpatient mental-health care, services partly supported by funding from cardiac and other surgeries now increasingly undertaken at specialty hospitals. “If we were a business like a specialty niche hospital we would never do mental health”, Sher says. But, he adds, “We made a commitment to the community that we were going to . . . because if we don’t, people for 200 miles aren’t going to have any.” If profitable procedures continue to migrate to their own hospitals, Sher said, “10 years from now when you’ve got this crisis . . . emergency rooms closing and everywhere else community hospitals are failing left and right, you’re going to say to yourself, ‘what did we do to our community hospitals?’”
Nellie Bristol www.thelancet.com Vol 366 July 16, 2005
Physician-owned specialty hospitals in the USA Some doctors in the USA are leaving the stress of community hospitals to set up centres of their own. But angry hospital managers claim physician-owned centres cherry pick the insured and healthy, leaving community hospitals to deal with the rest. Nellie Bristol reports from Washington.
www.thelancet.com Vol 366 July 16, 2005
Situations like the one between BryanLGH administrators and NHI cardiologists are cropping up in communities throughout the USA. The tension has led to the establishment of about 100 physician-owned hospitals that specialise largely in cardiac, surgical, and orthopaedic procedures. Concerns about possible negative economic effects on community hospitals and the potential for overuse of health-care services when physicians own the institutions to which they refer patients have driven the issue to Washington, where lawmakers and regulators are now considering the future of the fledgling industry. Opponents of physician-owned specialty hospitals, which include two powerful hospital groups, are urging Congress to restrict the facilities. “Because physician owners tend to refer healthier, well-insured patients to the facilities they own, the full service community hospitals are left to provide essential services that are seldom self-supporting—emergency services, burn units, trauma care, and care for the uninsured”, says American Hospital Association executive vice president Rick Pollack. The groups are asking Congress to make hospitals subject to statutes that bar physicians from referring Medicare and Medicaid patients to facilities they invest in. Other health services are subject to the self-referral laws but hospitals are exempt. Banishment from such huge payers as Medicare and Medicaid would severely limit the specialty-hospital industry. Physician owners argue that specialty hospitals are more efficient, provide better quality care, and give higher patient satisfaction. Physicians enjoy working at smaller, more nimble institutions where they make the decisions. “We see something we can
do better by making a change, we meet tonight, tomorrow the change is implemented”, says Gard. “When you work through a hospital system, the bureaucracy takes a long time.” An 18-month moratorium on construction of new physician-owned cardiac, surgical, and orthopaedic hospitals was imposed by Congress in 2003 to allow lawmakers time to collect data on the facilities’ impact. The ban ended on June 8, 2005. Studies completed this spring show the facilities tend to treat healthier, less costly patients in more profitable payment categories, but that so far, community hospitals have not suffered as a result. They also show that quality at the facilities is as good as, or better, than that at full-service hospitals and that patient satisfaction is high. Responding to the findings, the Centers for Medicare and Medicaid Services (CMS), which runs the government health programmes, indicated that it will not approve any
Rights were not granted to include this image in electronic media. Please refer to the printed journal. www.photolibrary.com
In some ways, BryanLGH Medical Center is a victim of its own success. The 583-bed full-service, not-forprofit medical facility in Lincoln, NE, USA, had a remarkable mobile cardiac diagnostic programme in the 1990s, run as a joint venture between the hospital and Nebraska Heart Institute (NHI) physicians. The programme, with its fleet of eight vans, served a 48county area in this largely rural state. BryanLGH was the hub of the effort, providing acute-care services required by the network’s sickest patients. But with as many as 1400 cardiac procedures undertaken in a year, there came a point when the hospital could not keep up with its workload. Sometimes, the hospital was even forced to turn away patients, a situation Lincoln cardiologist and NHI member Joseph Gard found hard to take. “We tell patients that if you need something from a heart standpoint we’ll be there to take care of them and then we get the call that one of the patients is critically ill and has to be admitted and we have to say, ‘sorry we have no beds’. Emotionally that just seemed an unacceptable position to be in”, he says. Administrators attempted to placate the physicians in various ways, including plans for a US$200 million expansion project that would add 50 beds to BryanLGH. But 14 members of the NHI decided to build their own hospital anyway. The Nebraska Heart Hospital, a 63-bed cardiac-care facility, opened in Lincoln in 2003. With NHI physicians now referring many of their patients to their own facility, BryanLGH is down to 700 cardiac procedures a year and is scrambling to make up declining revenues. The mobile cardiac service was split into two competing programmes.
193
World Report
Rights were not granted to include this image in electronic media. Please refer to the printed journal.
additional physician-owned facilities to take part in the Medicare programme for 6 months. Further, it will instigate payment changes to negate incentives to treat healthier patients and will examine specialty hospitals to ensure that they meet the definition of a hospital, meaning that they provide primarily inpatient services. In a more draconian move, two leading Senate health lawmakers, Finance Committee Chairman Charles Grassley (R-Iowa) and ranking Democrat Max Baucus (D-Montana), recently introduced legislation that would enact the hospital lobby position and ban physicians from referring Medicare and Medicaid patients to new specialty hospitals in which they have an ownership interest. The bill could be considered later this year. No matter where government policy ends up, limited service hospitals expose weaknesses in the Medicare payment system and highlight questions about health-care services and the free market. They also reveal what seems to be a growing enmity between hospital administrators and physicians. “There’s a huge disconnection between physicians and administration at hospitals all across the country that is frustrating, bad for patients, bad for medicine and ultimately bad for hospitals”, says Tulsa, OK, neurosurgeon Steven Gaede. Gaede took on US$1·8 million in debt to finance his share of the Tulsa 194
Spine Hospital, feeling, like Gard did, that he could not take care of his patients to his satisfaction at the local community hospital. Gaede acknowledges that the spine facility “has to make money, the debt is going to get paid off”, but denies charges of cherry picking and over utilisation. He sees how they could be issues, but says they are problems not limited to specialty facilities. “Anybody can game any system”, he says. “I can tell you stories of people who are making far more money than I am that aren't part of a specialty hospital, that are simply overdoing surgery, and they’re working at a community hospital.” Ultimately, Gaede says, physicians are well paid professionals who need more motivation than just money to take on the financial risk and extra work of running their own hospital. “What everybody’s missing, I think, is that yes there are a few outliers who are all about money. But the vast, vast majority of physicians have huge amounts of inertia. We’re busy, we’re making decent money. Why would we take a bunch of risk to do something unless we absolutely believe in it with all our hearts?” Gaede asks. Physician investors will find a sympathetic ear among some influential Congressional Republicans who support free-market competition as a way of improving services. “Competition drives down cost and improves the quality of health care”, House Energy
and Commerce Committee Chairman Joe Barton (R-Texas) said at a recent hearing. “The rise of specialty hospitals will press traditional community hospitals to become leaner, faster and better.” Leaders on the House Ways and Means Committee say the hospitals are an indication that Medicare regulations and payments need to be reformed. Health subcommittee Chair Nancy Johnson (R-Connecticut) is looking into payments that reward collaborative efforts in patient care. The panel’s Chairman, Bill Thomas (R-California) is considering a review of physician-owner self-referral laws, which he says may be inadvertently stunting professional coordination. The facilities also raise a larger economic issue, Thomas says. If hospitals continue to lose the most lucrative services, at some point society and government would need to look at the question, “are the things left over worth doing and if they are to what extent are they worth doing to the point that society would pay for them?” he says. Bradley Sher, vice president, managed care/public policy for BryanLGH says that is exactly where his hospital will be if specialty facilities continue. He said his facility loses US$4 million a year on inpatient mental-health care, services partly supported by funding from cardiac and other surgeries now increasingly undertaken at specialty hospitals. “If we were a business like a specialty niche hospital we would never do mental health”, Sher says. But, he adds, “We made a commitment to the community that we were going to . . . because if we don’t, people for 200 miles aren’t going to have any.” If profitable procedures continue to migrate to their own hospitals, Sher said, “10 years from now when you’ve got this crisis . . . emergency rooms closing and everywhere else community hospitals are failing left and right, you’re going to say to yourself, ‘what did we do to our community hospitals?’”
Nellie Bristol www.thelancet.com Vol 366 July 16, 2005