Tuesday, December 14, 2004

The Creeping Specialty Scourge..
NPR yesterday had a story on the increasing popularity of specialty hospitals and how they are potentially harming the community general hospital:Growing trend of surgeons opening their own specialty hospitals
MONTAGNE: For patients in many states, planning for certain medical procedures has become more like planning a stay in a hotel. Rather than a traditional hospital, they can choose a specialty surgical hospital. Many of these boutique hospitals are owned by surgeons who refer their own patients. The surgeons can earn income twice on a patient, as a doctor and as a hospital owner. Full-service and community hospitals complain that specialty hospitals are! e threatening their survival by skimming off the most profitable insured surgical patients. Surgeons say small specialty hospitals give patients a better experience. NPR's Wade Goodwyn reports from Baton Rouge.

WADE GOODWYN reporting:

Lafayette and Baton Rouge are in the Cajun heart of fried seafood country.

Unidentified Man #1: You have a bed over there, Hope?

GOODWYN: Catfish, shrimp, etouffe, po' boy sandwiches. In bayou country, the batter is not about baseball, and the oh-so-good food will eventually kill you.

Unidentified Woman: What kind of medical history do you have?

Unidentified Man #2: My daddy had a major heart attack. He died of cerebral hemorrhage.

GOODWYN: The emergency room here at Our Lady of the Lake general hospital is an integral part of this region's health care, its first line of defense. Like many emergency rooms and burn centers and intensive care units, this hospital emergency room is not a moneymaker. It's a money loser.

Mr. BOB DAVIDGE (Our Lady of th e Lake): The question is, how are we going to pay for it? We are losing the ability that we once had.

GOODWYN: Bob Davidge has been Our Lady of the Lake's CEO for the last 25 years.

Mr. DAVIDGE: Every hospital in the country cost-shifts to cover the shortfall in Medicare, Medicaid, charity patients, bad-debt patients. It's all shifted to the private-paying patient. When these facilities focus on just the paying patient, then we lose that ability to cost-shift.

GOODWYN: The facilities that Davidge is talking about are specialty surgical hospitals, and they have begun popping up all over Baton Rouge and Lafayette, six in the last five years. Cardiac surgery, orthopedic surgery, neurosurgery; surgeons are learning here that they can bypass traditional acute-care hospitals and start their own specialty hospitals. But Davidge says that in order for his full-service hospital to stay viable, he needs the surgeons to operate at Our Lady of the Lake, not start their own hospital.

Mr. DAVIDGE: The neuro-hospital that has yet to open, we forecast, will cost to the bottom line $2 1/2 million. That's just about 25 percent of our bottom line from operations. So that's a big, big hit.

Mr. Goodwyn continues:
GOODWYN: Think of these specialty surgical centers as hospitalettes. Most don't have emergency rooms or intensive care units. It used to be that the federal government regulated where and how many new hospitals could be built, but in the mid-1980s, the Reagan administration abolished those laws. Now the national landscape is a hodgepodge of state legislation. Some states still strictly control how many new hospitals are built and what kind of medical services they must offer, but some states have abolished those controls, and it is in these states that specialty hospitals have begun to proliferate: Texas, Oklahoma, Kansas, South Dakota, Arizona and California. And there's been such a rush in Louisiana that some conservative Republican state senators have begun to object.

State Senator TOM SCHEDLER (Republican, Louisiana): The last thing I want would be to wake up and find no acute-care hospital in a community with four specialty hospitals. That's a recipe for disaster.

GOODWYN: Tom Schedler represents what is called the North Shore area, from Lake Pontchartrain down to the city of New Orleans. He got involved when his district's general hospital lost 30 percent of its cardiac surgery business after the cardiac surgeons there built their own specialty hospital. That hospital has been such a success that the orthopedic surgeons in Schedler's
The story goes on to describe the current federal moratorium on specialty hospitals that is due to expire in March of 2005. A study by the Medicare Payment Advisory Commission is ongoing to analyze the impact:
For example, they're finding that while full-service hospitals do indeed take a financial hit whenever specialty hospitals open, they usually find ways to recover some of that lost revenue: operating room schedules suddenly become more flexible, turnaround times are shortened, equipment is upgraded.
So competition is a good thing. The story also notes that the Medicare reimbursement is the same regardless of where the procedure is performed. The NPR audio also has a useful"summary" of some of the facts surrounding the controversy.
In the last two decades, reimbursement to physicians has been reduced, regulations have increased, malpractice premiums have soared, and the traditional relationships between physicians and hospitals have been drastically altered. Numerous laws and regulations target hospital incentives to physicians, claiming such conduct is "suspect."Virtually any activity that could influence where a physician refers a patient is within the sights of government regulators. The federal government and many states prohibit physicians from referring patients to entities with which the physician, or an immediate family member, has a financial or ownership interest. The federal law, commonly referred to as the "Stark" law, has certain exceptions, including investments in large publicly traded companies, ambulatory surgery centers (ASC) and hospitals as a whole. The theory of the "whole hospital" exception is that there is less risk that profit is the motive for the referral of a patient where the physician's investment bears the financial and regulatory burdens of an entire hospital. In addition, the Stark law acknowledges that profit motives are lessened or eliminated when physicians perform the services on the patients they refer to the ASC or hospital in which they have an ownership interest.
Hospitals themselves are beginning to fight back:
Hospitals also have begun to use a more direct tactic, denying or revoking the medical staff privileges to physicians who are in competition with the hospital. Physicians protest this tactic that they call "economic credentialing.' But in 2001, the South Dakota Supreme Court upheld a lower court ruling permitting a general hospital to deny privileges to doctors who were also involved with a local specialty hospital. In Arkansas, six cardiologists who are investors in a heart hospital filed suit against Baptist Health for terminating their medical staff privileges. The hospital argues that it has a responsibility to protect the hospital and to give the public access to a broad range of services; the physicians' competition threatens that. This may be the beginning of a trend. In January, OhioHealth terminated 17 physicians who invested in a nearby surgical hospital, and Eastern Idaho Regional Medical Center terminated the privileges of five physicians who had invested in a multi-surgery facility.
That has become an issue in my community as well. A private firm is developing a hospital with some physicians as investors. The new hospital will have an emergency room and care for indigent patients, but I wonder how long the ER would stay open. While the hospital has not threatened to pull outright the privileges of those physicians they have threatened to analyze future payer trends and if the percentage of "private pay" or Medicaid patients they admit to Big Hospital increases after the new facility is opened, they may face sanctions.
The community hospitals suffer not only because the insured (and more importantly, the healthy insured) are siphoned off to the specialty hospital with the resulting loss of revenue, they may also suffer from medical staff losses. If a physician can accommodate his patients at a specialty hospital or ASC and not need the local community hospital, why would they remain on staff? Sense of community duty? Good manners? For some it is simply an economic decision, and an easy one at that.
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