The Uncertain Future of Specialty Hospitals
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《新英格兰医药杂志》
In November 2003, Congress enacted legislation that imposed an 18-month moratorium on the development of new specialty hospitals that are partly owned by physicians who refer their patients to them.1 President George W. Bush signed the measure into law December 8 as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Very soon, Congress must decide whether to extend the moratorium, as recommended by one of the two federal agencies that legislators directed to study the matter, or adopt policies that enable physician-owners to build new specialty hospitals and thus encourage a form of competition (i.e., patient selection) that general hospitals regard as unfair. The manner in which the Republican-controlled Congress disposes of this issue will indicate the extent of that party's willingness to promote market-based solutions, largely unfettered by government constraints, in health care. By contrast, many Democrats and the general hospital community share the belief that the self-referral of patients by physician-owners to specialty hospitals represents unfair competition and should be strictly limited, if not prohibited, by the government. The moratorium expires June 8, 2005.
The issues surrounding the emergence of physician-owned specialty hospitals came to a surprising head last fall during meetings of the House and Senate Conference Committee that authorized many changes in the Medicare law, including the addition of an outpatient prescription-drug benefit. The law defines specialty hospitals as facilities that have some degree of physician ownership and are "primarily or exclusively engaged" in the care and treatment of patients with a cardiac or orthopedic condition or patients undergoing a surgical procedure or receiving any other specialized category of services designated by the secretary of health and human services. Since 1990, the number of U.S. specialty hospitals that are partially owned by physicians has tripled, and there are now approximately 100 such facilities. About two thirds of them are located in just seven states: Arizona, California, Kansas, Louisiana, Oklahoma, South Dakota, and Texas. Physicians are attracted to investing and practicing in specialty hospitals for two main reasons: to directly control hospital operations in relation to patient care and to augment their incomes.2
In general, federal law prohibits physicians from referring Medicare patients to facilities in which they or members of their immediate family have a financial interest. But there are several exceptions. One is known as the "whole hospital exception," and it allows physicians who have an ownership interest in an entire hospital and are authorized to perform services there to refer patients to that facility. Physicians who hold an ownership stake in a specialty hospital have cited this exception as the legal permission for them to self-refer their patients to these facilities. The general hospital community — as represented by the American Hospital Association and the Federation of American Hospitals — is actively lobbying for the repeal of this exception, asserting that physician-owned specialty hospitals represent an unfair form of competition and that the exception itself lacks legal standing.
As a part of the conference agreement, Congress directed the Department of Health and Human Services (DHHS) and the Medicare Payment Advisory Commission (MedPAC) to study the effects of specialty hospitals on general hospitals, the services general hospitals deliver that lose money (e.g., emergency and trauma services), and the cost and quality of the health care that specialty hospitals provide. The DHHS report, which will focus on the quality of care delivered in specialty hospitals, will soon be released. Thomas A. Gustafson, an official at the Centers for Medicare and Medicaid Services, testified to its preliminary results at two hearings on March 8 before the Senate Finance Committee and the House Ways and Means Committee. According to Gustafson, the findings "show that measures of quality at cardiac hospitals were generally at least as good , and in some cases were better than, local community hospitals" and that patient satisfaction "was extremely high." He said that the findings of the Centers for Medicare and Medicaid Services were consistent with some of the conclusions drawn by MedPAC. Both analyses found that specialty hospitals generally treat patients with less severe illness than do community hospitals and provide less uncompensated care than do community hospitals.
After the hearing, Senator Chuck Grassley (R-Iowa), who chairs the Finance Committee, told reporters that he favored an extension of the 18-month moratorium on the construction of new specialty hospitals. Grassley and the committee's ranking Democrat, Senator Max Baucus of Montana, are preparing legislation that "will rely on the MedPAC findings" to address issues surrounding specialty hospitals.
MedPAC issued its findings on March 8, saying in its executive summary:
In answer to the Congress' questions, we analyzed hospitals' Medicare cost reports and inpatient claims from 2002 (the most recent available) and found that: physician-owned specialty hospitals, thus far, do not have lower costs for Medicare patients than community hospitals, although their patients have shorter lengths of stay; they treat patients who are generally less severe cases (and hence expected to be relatively more profitable than the average) and concentrate on particular diagnosis-related groups (DRGs), some of which are relatively more profitable; they tend to have lower shares of Medicaid patients than community hospitals; the financial impact on community hospitals in the markets in which physician-owned specialty hospitals are located has been limited, thus far. Those community hospitals competing with specialty hospitals have demonstrated financial performance comparable to other community hospitals; many of the differences in profitability across and within DRGs that create financial incentives for patient selection can be reduced by improving Medicare's inpatient prospective payment system for acute care hospitals.2
The commission's finding that specialty hospitals treat patients who are less severely ill is similar to one of the conclusions reached in an empirical study by Cram and colleagues in this issue of the Journal (pages 1454–1462).
Based on its findings, the commission, whose 17 members are appointed by the Government Accountability Office, issued five recommendations as part of its report. The more technical of these recommendations called for improvements in the accuracy of Medicare's payments to providers with the goal of eliminating incentives for physicians to select their patients and opt for particular DRGs that are more profitable. The commission explained: "Under current policy, heart hospitals' expected relative profitability of that combination of DRGs and patients is about 9 percent above the national average profitability for all DRGs and patients. Following our recommendations, that ratio would be about equal to the national average. Orthopedic and surgical physician-owned specialty hospitals would show similar results." The administration's fiscal 2006 budget, which was released on February 7, indicated that "the administration will seek to refine the inpatient hospital payment system and related provisions of regulations to ensure a more level playing field between specialty and non-specialty hospitals."
The commission also recommended that Congress extend the current moratorium on specialty hospitals until January 1, 2007, noting that its members are "concerned with the issue of self-referral." Aligning the economic incentives for physicians and hospitals could lead to efficiencies. Physician ownership is the extreme form of aligning incentives; it makes the hospital owner and the physician identical, but it arouses concerns over issues such as self-referral. Similar benefits might be achieved by allowing the physician to share in savings that would accrue to the hospital from more efficient practices. The commission's recommendation to extend the moratorium represented a middle ground between ending it and repealing the "whole hospital exception," which would effectively end the development of physician-owned specialty hospitals. The commission's draft report noted: "Specialty hospitals may be an important competitive force that promotes innovation and may be an appropriate response to physician frustration with hospitals' responsiveness and desire for control."
Finally, the commission recommended that Congress "grant the secretary the authority to regulate gainsharing arrangements between physicians and hospitals to protect the quality of care and minimize financial incentives that could affect physician referrals." In a "gainsharing" arrangement, hospitals and physicians agree to share cost savings arising from efforts to reengineer clinical care in the hospital. Efforts to promote gainsharing arrangements in the late 1990s were largely halted in response to a special advisory issued by the Office of Inspector General of the DHHS in 1999. In a recent action suggesting that such arrangements are coming back into favor, the same office issued, on February 16, 2005, advisory opinions that gave the go-ahead to gainsharing arrangements between three hospitals and their cardiology groups.3 Under the arrangements, the hospitals would share a percentage of any savings that derive from using certain supplies during cardiac surgery and catheterization procedures. The next few months will be interesting, as we watch Congress grapple with the issues surrounding specialty hospitals.(John K. Iglehart)
The issues surrounding the emergence of physician-owned specialty hospitals came to a surprising head last fall during meetings of the House and Senate Conference Committee that authorized many changes in the Medicare law, including the addition of an outpatient prescription-drug benefit. The law defines specialty hospitals as facilities that have some degree of physician ownership and are "primarily or exclusively engaged" in the care and treatment of patients with a cardiac or orthopedic condition or patients undergoing a surgical procedure or receiving any other specialized category of services designated by the secretary of health and human services. Since 1990, the number of U.S. specialty hospitals that are partially owned by physicians has tripled, and there are now approximately 100 such facilities. About two thirds of them are located in just seven states: Arizona, California, Kansas, Louisiana, Oklahoma, South Dakota, and Texas. Physicians are attracted to investing and practicing in specialty hospitals for two main reasons: to directly control hospital operations in relation to patient care and to augment their incomes.2
In general, federal law prohibits physicians from referring Medicare patients to facilities in which they or members of their immediate family have a financial interest. But there are several exceptions. One is known as the "whole hospital exception," and it allows physicians who have an ownership interest in an entire hospital and are authorized to perform services there to refer patients to that facility. Physicians who hold an ownership stake in a specialty hospital have cited this exception as the legal permission for them to self-refer their patients to these facilities. The general hospital community — as represented by the American Hospital Association and the Federation of American Hospitals — is actively lobbying for the repeal of this exception, asserting that physician-owned specialty hospitals represent an unfair form of competition and that the exception itself lacks legal standing.
As a part of the conference agreement, Congress directed the Department of Health and Human Services (DHHS) and the Medicare Payment Advisory Commission (MedPAC) to study the effects of specialty hospitals on general hospitals, the services general hospitals deliver that lose money (e.g., emergency and trauma services), and the cost and quality of the health care that specialty hospitals provide. The DHHS report, which will focus on the quality of care delivered in specialty hospitals, will soon be released. Thomas A. Gustafson, an official at the Centers for Medicare and Medicaid Services, testified to its preliminary results at two hearings on March 8 before the Senate Finance Committee and the House Ways and Means Committee. According to Gustafson, the findings "show that measures of quality at cardiac hospitals were generally at least as good , and in some cases were better than, local community hospitals" and that patient satisfaction "was extremely high." He said that the findings of the Centers for Medicare and Medicaid Services were consistent with some of the conclusions drawn by MedPAC. Both analyses found that specialty hospitals generally treat patients with less severe illness than do community hospitals and provide less uncompensated care than do community hospitals.
After the hearing, Senator Chuck Grassley (R-Iowa), who chairs the Finance Committee, told reporters that he favored an extension of the 18-month moratorium on the construction of new specialty hospitals. Grassley and the committee's ranking Democrat, Senator Max Baucus of Montana, are preparing legislation that "will rely on the MedPAC findings" to address issues surrounding specialty hospitals.
MedPAC issued its findings on March 8, saying in its executive summary:
In answer to the Congress' questions, we analyzed hospitals' Medicare cost reports and inpatient claims from 2002 (the most recent available) and found that: physician-owned specialty hospitals, thus far, do not have lower costs for Medicare patients than community hospitals, although their patients have shorter lengths of stay; they treat patients who are generally less severe cases (and hence expected to be relatively more profitable than the average) and concentrate on particular diagnosis-related groups (DRGs), some of which are relatively more profitable; they tend to have lower shares of Medicaid patients than community hospitals; the financial impact on community hospitals in the markets in which physician-owned specialty hospitals are located has been limited, thus far. Those community hospitals competing with specialty hospitals have demonstrated financial performance comparable to other community hospitals; many of the differences in profitability across and within DRGs that create financial incentives for patient selection can be reduced by improving Medicare's inpatient prospective payment system for acute care hospitals.2
The commission's finding that specialty hospitals treat patients who are less severely ill is similar to one of the conclusions reached in an empirical study by Cram and colleagues in this issue of the Journal (pages 1454–1462).
Based on its findings, the commission, whose 17 members are appointed by the Government Accountability Office, issued five recommendations as part of its report. The more technical of these recommendations called for improvements in the accuracy of Medicare's payments to providers with the goal of eliminating incentives for physicians to select their patients and opt for particular DRGs that are more profitable. The commission explained: "Under current policy, heart hospitals' expected relative profitability of that combination of DRGs and patients is about 9 percent above the national average profitability for all DRGs and patients. Following our recommendations, that ratio would be about equal to the national average. Orthopedic and surgical physician-owned specialty hospitals would show similar results." The administration's fiscal 2006 budget, which was released on February 7, indicated that "the administration will seek to refine the inpatient hospital payment system and related provisions of regulations to ensure a more level playing field between specialty and non-specialty hospitals."
The commission also recommended that Congress extend the current moratorium on specialty hospitals until January 1, 2007, noting that its members are "concerned with the issue of self-referral." Aligning the economic incentives for physicians and hospitals could lead to efficiencies. Physician ownership is the extreme form of aligning incentives; it makes the hospital owner and the physician identical, but it arouses concerns over issues such as self-referral. Similar benefits might be achieved by allowing the physician to share in savings that would accrue to the hospital from more efficient practices. The commission's recommendation to extend the moratorium represented a middle ground between ending it and repealing the "whole hospital exception," which would effectively end the development of physician-owned specialty hospitals. The commission's draft report noted: "Specialty hospitals may be an important competitive force that promotes innovation and may be an appropriate response to physician frustration with hospitals' responsiveness and desire for control."
Finally, the commission recommended that Congress "grant the secretary the authority to regulate gainsharing arrangements between physicians and hospitals to protect the quality of care and minimize financial incentives that could affect physician referrals." In a "gainsharing" arrangement, hospitals and physicians agree to share cost savings arising from efforts to reengineer clinical care in the hospital. Efforts to promote gainsharing arrangements in the late 1990s were largely halted in response to a special advisory issued by the Office of Inspector General of the DHHS in 1999. In a recent action suggesting that such arrangements are coming back into favor, the same office issued, on February 16, 2005, advisory opinions that gave the go-ahead to gainsharing arrangements between three hospitals and their cardiology groups.3 Under the arrangements, the hospitals would share a percentage of any savings that derive from using certain supplies during cardiac surgery and catheterization procedures. The next few months will be interesting, as we watch Congress grapple with the issues surrounding specialty hospitals.(John K. Iglehart)