Wednesday, January 12, 2005

The Creeping Specialty Scourge II.....
From this week's New England Journal of Medicine:The Emergence of Physician-Owned Specialty Hospitals:
In 1972, the federal government, no longer satisfied that America's social contract with its physicians could be shaped by self-regulation alone, began to weave a complex web of laws and regulations circumscribing the business practices of doctors. As a consequence, the government, with very few exceptions, prohibits physicians from referring their Medicare and Medicaid patients to freestanding entities in which a practitioner or a member of the practitioner's immediate family has an investment interest. One of these exceptions, known as the "whole-hospital exception," has become the subject of a serious dispute, because general hospitals strongly object to the use of this exception by physicians who refer their patients to specialty hospitals in which these practitioners hold an ownership interest.

Although most of the specialty hospitals that have opened since 1990 are located in only a few states, the number of such hospitals has tripled nationally, to some 100 facilities. This rapid growth has raised concerns among general hospitals, which consider the specialized facilities an unfair form of competition as they currently operate that should be outlawed. Recognizing these concerns, in December 2003 Congress declared a moratorium of 18 months on the development of new specialty hospitals that are partly owned by physicians who refer their patients to them and directed two federal agencies to study the effect of these facilities on the health care system.
The specialty hospital numbers are increasing, for many reasons:
The specialty hospitals are part of a large movement that is roiling relations between general hospitals and physicians throughout the country - the shifting of patients to alternative settings. The number of ambulatory-surgery centers, diagnostic testing facilities, and specialty hospitals has steadily increased during the past 15 years as physicians, taking advantage of new forms of technology, available capital, and supportive health policies, pursue new ventures outside hospitals and their control. Also propelling this shift to alternative settings is the view held by many physicians that hospitals are not responsive to physicians' demands for a larger voice in the governance of the hospitals. Other factors that have energized physicians are the ongoing consolidation of private health care insurers into ever larger enterprises and the hospital mergers that are increasing the market muscle of general hospitals in a growing number of communities.
The hospitals are seen by many as a bully and specialty/physician-owned facilities are seen as a way to exercise control. The growth is confined to a few states that do not have certificate-of-need laws:
In a 2003 report requested by Congress, the GAO counted 100 specialty hospitals in 28 states and an additional 26 entities under development About two thirds of the specialty hospitals in operation or under development are located in just seven states: Arizona, California, Kansas, Louisiana, Oklahoma, South Dakota, and Texas. Most of these facilities (85 percent) are in rapidly growing urban areas, although only 43 percent of those that have opened since 1990 are in such areas. Virtually all specialty hospitals -96 percent of those built since 1990 - are in states that do not require the developers to secure a "certificate of need," which is a permit that is issued by states before a health care facility may be constructed or expanded.

The GAO also reported that more than 90 percent of the specialty hospitals that have opened since 1990 are for-profit entities, as compared with 20 percent of all general hospitals. Specialty hospitals are much less likely than general hospitals to have emergency departments (45 percent vs. 92 percent) or to treat Medicaid or uninsured patients. In 2001, specialty hospitals accounted for an estimated $871 million, or 1 percent, of Medicare's spending on inpatient services, nearly two thirds of which went to facilities that treat patients with cardiac disorders .
Supporters of such facilities tout their competitive advantages:
Physicians practicing at both types of facilities told us that they can perform about twice as many cases in a given time period at specialty hospitals as at community hospitals. Physicians mentioned operating room turnaround times at specialty hospitals of 10–20 minutes, compared with over an hour at the community hospitals where they also practice. . . . Surgeons at one specialty hospital told us about working between two operating rooms at once to increase their productivity. At one specialty hospital, we were told that physician incomes had increased by 30 percent as a result of increased productivity........
......Even the possibility of the development of a specialty hospital in a particular market can have a strong influence on the reactions of general hospitals A case in point is the city of Indianapolis, 1 of 12 cities or counties that have been studied closely over the past decade by the Center for Studying Health System Change, a nonprofit research organization supported by the Robert Wood Johnson Foundation. One of the center's analysts, Kelly J. Devers, described the scene in Indianapolis at a conference in Washington, D.C., on April 15, 2003:

The building boom began when specialists affiliated with one of the four major (nonprofit) hospital systems threatened to partner with MedCath. . . . These physicians had pressed the system to build a new hospital in which they could share ownership interest but were turned away. The new competitive threat posed by a heart hospital jointly owned by its cardiologists and MedCath convinced the system to build a freestanding heart hospital, and the physicians own up to a 30-percent share. Another hospital system also bent under pressure from specialists who threatened to partner with MedCath, agreeing to build a new freestanding facility in which they could own up to 50 percent. Given the increased competition from specialty heart hospitals and the MedCath threat, the two remaining large hospital systems in the market built their own heart hospitals, but without physician ownership.

Hospitals are beginning to fight back:
General hospitals have also responded in other ways to physicians who shift, or threaten to shift, their patients to a specialty hospital. The general hospitals have sought to deny admitting privileges to physicians who become part owners of a nearby specialty hospital (a practice known as economic credentialing) or have denied them promotions. Some courts have upheld these actions, but there are cases pending. Devers reported that general hospitals have also attempted to discourage health care plans from contracting with specialty hospitals "by threatening to terminate their contracts for all of the hospitals in the system and all of the services."
As stated above the courts are still sorting out the "restraint of trade" issues.
As I posted earlier the Big Hospital was considering such "economic credentialing" measures to "insure solvency". Such requirements would include:

Disclosure of any "financial relationship" with another hospital which would include"investment interest....contractual relationships...and any other remuneration". The existence of such could result in the termination of privileges or a prohibition on holding medical staff office.

The practice of "proportional admissions". That is, the payer mix of your practice should match your admitting profile to Big Hospital. If you "fall off the curve" you would be required to provide practice records for analysis.

A "pre-application" process which may involve a "pre-application" interview. The "pre-application" form has questions about "financial relationships" with other hospitals as well as questions about "plans for performing procedures in your office that would usually be performed in the hospital". So not only will the hospital look askance if you are a shareholder in a hospital or ambulatory surgery center, they will also take issue if you, as many plastic surgeons and gastroenterologists do, have equipment and staff to perform procedures in your own office. The real beauty of this approach is the legal sleight-of-hand concerning the "pre-application". Under regulations if a physician's application is denied, they are entitled to a hearing and appeals and the whole due process thing. All avoided by the "pre-application" use. Clever, isn't it?

I hope I have enough blood in my finger to sign this when it comes across my desk.

Serving on multiple hospital committees I can appreciate the situation the hospital is in. They lose the high-dollar procedures to the specialty hospitals and they get the sickest patients. The only leverage the hospital has is to place conditions on staff participation. This has managed care implications as well since some plans have exclusive contracts with certain hospitals. So if you're not on staff you cannot participate in the plan. OTOH the measures described above seem quite Orwellian to me. Of course the true test of these measures won't be the up-or-down vote of the board or medical staff, it will lie in if and when they are used. A paper tiger? Time will tell.
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