Monday, August 08, 2005

More on Specialty Hospitals....
While walking along a street in the seaside town where I was vacationing last week I came across the Tuesday edition of The Wall Street Journal in a newspaper machine and had to hit Ms. Parker up for fifty cents, since I could not let an article entitled: A Surgeon Earns Riches, Enmity By Plucking Profitable Patients to slip past.
In a 2000 speech, neurosurgeon Larry Teuber asked rhetorically why doctors would want to open a hospital dedicated to surgery. "Profit, profit, profit," ran his answer. When it comes to taking business from general hospitals, "you can't believe how easy it is," he said.

Dr. Teuber, the founder of the Black Hills Surgery Center here, soon proved his point. The company that owns Black Hills went public last year, bringing Dr. Teuber a $9 million payday. He and his wife own six airplanes and a vacation home in Jackson Hole, Wyo. When his children's hockey teams needed a rink, he put up $600,000 to help build one.
Nice work if you can get it. The bad blood is certainly flowing pretty thick:
At one point, Dr. Teuber sent anonymous letters to Regional patients encouraging them to sue a doctor there for malpractice. His bare-knuckles strategy has cost him some friendships. Timothy Frost, a radiologist who went to medical school with Dr. Teuber and practices at Regional, says he no longer speaks with his old colleague. Dr. Frost's wife was maid of honor at Dr. Teuber's wedding, but the wives no longer socialize. Black Hills "has spelled the end of any true collegiality in the Rapid City medical community," says Robert Ferrell, a Regional surgeon

There's more:
Competition between the two hospitals has been especially fierce in neurosurgery, Dr. Teuber's field. Regional performed 764 neurosurgery operations in 1996. By 2000, the number had dwindled to just 187. Regional began to fight back. In 2001 it recruited Steven Schwartz, who was fresh out of residency. Although not yet board-certified in the specialty, Dr. Schwartz quickly started doing as many as several procedures a day. That year, the number of neurosurgery cases at Regional rose to 336, and it continued climbing to 531 in 2002.

In early 2002, Dr. Teuber confirms, he anonymously mailed letters to three of Dr. Schwartz's patients, alleging their operations may have been botched. He says he heard about the cases from doctors who consulted him. He enclosed with the letters a photocopy of a malpractice lawyer's advertisement from the phone book. Dr. Teuber says he mailed the letters because Regional had been covering up for the surgeon's poor work. The hospital denies that.

Dr. Schwartz has since had many malpractice suits filed against him. At least 20 are still pending, including a suit brought by one of the patients Dr. Teuber prodded. Many of the suits also name Regional. They allege that Dr. Schwartz performed unnecessary surgery, operated on the wrong side of patients' spines and fused the wrong disks in patients' backs. The South Dakota State Board of Medical and Osteopathic Examiners later placed Dr. Schwartz on probation. His lawyer, Lonnie Braun, denies the allegations of malpractice.

Some of the plaintiffs say Regional protected Dr. Schwartz because it was under competitive pressure. A suit brought by Miriam Conley, a Rapid City woman who alleges Dr. Schwartz operated on the wrong disk in her back, says Regional "intentionally concealed" his mistakes because his surgeries otherwise "would be performed in facilities competing with Rapid City Regional Hospital."

Regional was forced to pay a $6 million Medicare fine in late 2002 to settle federal allegations that it gave some local cancer doctors office space, staff and other benefits to induce them to refer patients to the hospital. Federal law bars inducements for Medicare-patient referrals. Dr. Teuber prepared an inch-thick, bound paperback book detailing the case, and he says his staff placed copies in the mailbox of every doctor at Regional.

As a result of that incident and the anonymous letters, Regional took away Dr. Teuber's privileges at the hospital, meaning he could no longer perform surgery there. His neurosurgery-practice partners at Black Hills soon quit the staff of Regional or took leaves of absence.

The contrasts between the surgery center and the hospital are highlighted:
Regional is a typical general hospital. It has an emergency room and 366 beds. It handles nearly all the births in town, performs cancer and cardiac surgery, and cares for the mentally ill. The hospital has linoleum floors, shared rooms for most patients and a menu that runs toward meatloaf.

At Black Hills, there is no emergency room or maternity ward. Eighty percent of its procedures are either in neurosurgery -- the brain and the spinal cord -- or for orthopedic problems involving bones, ligaments and the like. Most patients stay only a day or two in one of its 23 carpeted private rooms, each of which comes with a laptop computer, wireless Internet service and chocolates. Recent menu selections included prime rib, creme brulee and a choice of wines.
Regional has suffered both economically and procedurally:
Black Hills had $19.2 million in net income on revenue of $45.2 million last year, according to Medical Facilities filings. Regional's $8.3 million operating loss came on revenue of $247.5 million, according to its annual report. Its net income, which also includes investment returns, fell to $187,155 last year from $21.5 million in 2001.

Figures on outpatient orthopedic surgery illustrate the damage at Regional. Between 1997 and 2003 the number of such operations fell by 52% to 845 cases. The proportion of the patients who had private insurance, which pays more generously, fell to 19% from 39%.
While at Black Hills quite a few nails are getting hammered:
Since Dr. Teuber's center opened in 1997, the rate of outpatient surgery in Rapid City has doubled. It now has one of the highest rates of back surgery in the country, according to data compiled by Dartmouth Medical School researchers.
The usual accusations of "cherry picking" are thrown about:
Regional says its surgical patients tend to come to the operating table nowadays with more ailments. That hits the bottom line because Medicare and private insurers pay a flat fee for many types of surgery, regardless of the patient's underlying health. Black Hills acknowledges it treats fewer of the complicated cases.

An example is hip replacement, one of the most common types of orthopedic surgery performed at Black Hills and Regional. In Rapid City, Medicare pays $9,700 for a hip replacement. A recent study by the Medicare Payment Advisory Commission, a federal body that advises Congress on Medicare issues, suggests that a hospital replacing the hip of an otherwise healthy patient would keep about $1,350 of that after costs. But replacing the hip of a sick patient -- say, one with diabetes, emphysema and heart problems -- would saddle a hospital with a loss of about $4,000 because those patients often require specialized anesthesia, extra nursing care and a longer hospital stay.

In general, Regional has been saddled with "a monopoly on low-paying services," says Charles Hart, chief executive of the health system that owns the hospital. One example is its neonatal intensive care unit, which wrote off $13 million in uncollected charges from the middle of 2003 through end of last year.

One recent morning in the unit, a 37-day-old baby who weighed just one pound at birth was sleeping in a $30,000 incubator. The child required intensive nursing care and was expected to remain in the hospital for several months, said his doctor, Steven Benn.

The baby's mother was a Medicaid patient, which meant that Regional would only recover about half of the $465,000 in costs that it expected to incur in caring for the infant, the hospital said. Patients on Medicaid, the federal-state program for the poor, account for 13.3% of Regional's total. At Black Hills, the figure is 4%.
Dr. Teuber replies:
Dr. Teuber has little sympathy for Regional. He says providing services like neonatal care and an emergency room are part of the public mission that qualifies Regional as a nonprofit and gains it a tax exemption.

Dr. Teuber says Regional administrators have gotten too comfortable with the hospital's longtime monopoly status. For example, when Regional does a hip replacement it lets the surgeon choose the brand of artificial hip. That means many brands are used, and Regional pays a higher price for each. Black Hills, by contrast, uses a single brand and negotiates deep discounts with the supplier, Dr. Teuber says.
On the latter I agree with Dr. Teuber. One of the best ways to cut costs is by standardization. But hospitals don't want to alienate their "high dollar" specialists by restricting supplies. Would that change if the orthopedists knew that the rep is making more off the case than they are? The numbers I have from a conference handout reveal that in 2002 Medicare reimbursement for a "metal on metal" total hip implant was $1,452 while the implant itself cost $7,988. Given the usual 20 percent commission the rep received $1,597. You can do the math.
But Dr. Teuber also speaks of the "public mission" of Rapid City Regional. The author of the article does not ask the good doctor what his "public mission" is, or should be. The question that is at the core of the specialty hospital debate is what does a physician owe his or her community? One of the reasons that I and my partners are supportive of the local trauma hospital is that we, our families, and our friends drive on the streets of our community and if we or they were injured, we would want the best care available. If all of your specialists are elsewhere, who will provide that care?
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