Eye of the Reform
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soon to become law. But one provision with a hidden clause is threatening the business owners of specialty or, physician-owned hospitals. ABJ examines why these doctor-owned facilities are caught in the center of the political storm.
“America’s Affordable Health Choices Act of 2009” Sec. 1156. Limitation on Medicare exceptions to the prohibition on certain physician referrals made to hospitals.
How could one ideology be good for all the people, yet detrimental for doctors who own hospitals?
The American system been deregulated for a long time, and so the idea of restricting its growth as an industry in order to allow for greater equality and enhanced basic healthcare has not been taken lightly by the business community.
Since its conception, the American healthcare system has been privatized with little inference by government, for the most part. Physician-owned hospitals have been threatened by pieces of legislation before, but the Healthcare Reform Act may indeed shutdown their businesses. The debate over hospital ownership is nothing new, however.
Backroom of politicking
There are currently 226 doctor-owned hospitals in the country, according to Physician Hospitals of America (PHA). The professional association was started almost 10 years ago by a number of hospital CEOs and doctors. “They were seeing a trend of political opposition to our hospitals and decided that they should get together and form a group,” explains Molly Sandvig, executive director of Physician Hospitals of America (PHA).
The PHA is board-run and in 2005 began to hire administration, as they headed in a new direction. “I came on board and suggested a need to consider all kinds of doctors and hospitals because the real issue has nothing to do with specialization, but rather doctors owning hospitals,” points out Sandvig.
Representing doctor CEOs
At this point, PHA currently has about 187 hospital members ranging from specialty to women’s hospitals, to rehab, pediatrics and general acute care. Sandvig says the association has expanded in numbers and also, types of facilities. “At this point we are the only trade association that is focused specifically on doctor ownership, so that draws physicians and hospitals to us. We are politically active, and we have not had much respite from that requirement,” admits Sandvig.
Challenging hurdles to jump
While U.S. politicians have been trying to make changes to the healthcare system as a whole, change in itself is not something that comes easily for most. “Since the time we have been taken out of the moratorium, we have been in 12 separate bills challenging our ability to go forward, and also seeking to harm the existing doctor-owned hospitals,” tells Sandvig.
Heart of the reform
The Healthcare Reform Act now before the Senate, now soon to become law has a provision—a hidden clause that is threatening the doctor CEOs. “The bills would basically destroy hospitals under development that are physician-owned. Anything not Medicare-certified by January 1 in the House or November 1 in the Senate would not receive Medicare certification, and going forward no new hospitals would be Medicare certified if they are physician-owned. The future of these hospitals is dismal if this language goes through. This affects thousands of jobs, not to mention all the money—over $5 billion in construction on new hospitals—all that investment would be lost,” says Sandvig.
Without pointing fingers, PHA says it has friends in both political camps. The association wants to get its message heard amongst all the heckling on Capitol Hill. The group of physicians believes in providing choice. “We are competition for hospitals, positive competition. We are a break from the norm and that certainly is the reason existing non-profit and for-profit hospitals that are often focused more on administration and less on patient care, are not interested in allowing doctors that degree of control and to provide that type of competition,” says Sandvig.
Proof is in the pudding
According to Becker’s Hospital Review, a U.S. publication on legal and business issues for health system leadership, there are “several benefits of physician-owned facilities including the ability to attract the best physicians due to potential profits from ownership, enhanced competition, greater efficiency and amenities often not available at traditional hospitals.”
In a document provided by the American Medical Association, a 2006 Government Accountability Office (GAO)-funded study published in Health Affairs found that risk-adjusted 30-day mortality rates were significantly lower for specialty hospitals than for community hospitals. The study also found that “patient satisfaction among Medicare beneficiaries treated in specialty hospitals was very high—contrary to allegations made by competing hospitals,” meanwhile specialty hospitals “actually stimulate a competitive environment in some markets, which could have positive effects on quality of care.”
Despite these benefits, some other groups still oppose physician-owned facilities. The American Hospital Association currently wants to prohibit physicians from referring patients to hospitals in which they have an ownership stake, and several provisions in the healthcare reform bills will limit the growth of new and existing physician-owned hospitals, according to the report.
Critics’ concern about growth of specialty providers
The American Hospital Association is particularly concerned about “niche or specialty providers” due to their nature and pace of growth. “The AHA is very concerned that the growth of limited-service providers, if left solely to market forces, will undermine access to health care services for communities across this country,” Matt Fenwick, senior associate director of media relations for the American Hospital Association said in a statement.
Fenwick added that “the AHA supports a physician self-referral ban with limited exceptions for existing facilities that meet strict investment and disclosure rules.” According to the American Hospital Association, “eliminating physician self-referral will benefit both patients and communities, because it saves taxpayer money, ends a serious conflict of interest and, above all, allows full-service community hospitals to provide vital care for all those in need.”
Caught in a political storm
On the surface, one would think innovation and improvements induced by a healthy dose of competition would be good for all patients. But critics say specialty hospitals seem to cater to the upper crust by focusing on surgeries that generate the most revenue for the hospital. If these specialized facilities are prosperous, with many patients well-treated, general hospitals will suffer financially as they’re forced to continue to offer money-losing operations, such as emergency rooms.
The business case: right to own and a need to fulfill
A study published last January examined the economic impact of physician-owned hospitals in Arkansas, Indiana, Louisiana, South Dakota, Nebraska, Ohio, Pennsylvania and Texas. The study conducted by the Health Economics Consulting Group found that: “Physician-owned hospitals add considerable value to state economies, ranging from a net effect of $117.8 million in Pennsylvania to $2.3 billion in Texas. The combined financial impact across all eight states is $2.9 billion.” This implies that physician-owned hospitals, through their employment and capital expenditures, generate a total of $3.9 billion in economic activity in these eight states alone, as cited in the report.
But what does this signify other than doctor-owned facilities earn revenue for running a business? This scenario is no different than any private healthcare providers who own and operate his or her own business. A procedure is still conducted to the best of the doctors’ ability.
When asked what would be lost for these physician-owned hospitals, Sandvig points out that these doctor CEOs take a personal risk by putting their money on the line. “In certain instances, if the hospitals go down, it brings their personal clinic down with them, and leaves the community without proper access to a physician,” explains Sandvig.
A broken system
As millions of Americans go without access to basic healthcare, the bills before the Senate provide a sense of hope and security. Even still, the concept of changing the current system to an increasingly government-funded one has been widely debated since being put back on the political agenda.
Many Americans have mixed feelings. There is a sense that some inevitable change to the system is in the air. To what degree widely depends on the negotiation process between the House and Senate. Still, the thought of an increased government-run system makes many feel uneasy, especially when looking north of the border to Canada.
Canada’s publically-funded system has become dangerously strained with an increasing aging population, as well as lack of resources and equipment due to lackluster government funding. Nevertheless, all citizens have equal access to healthcare.
On the other hand, experts say the American privatized system is just as flawed, hence the reform. “What we stand for, as an industry, is we absolutely acknowledge that our system is broken but, we think that heading down the direction of improved quality of care, improved efficiencies, primary care services and trying to achieve lower costs is the direction we are trying to head, and we can really provide some assistance in that regard,” says Sandvig.
The white elephant in the room
“The ultimate conflict of interest is not physician ownership of hospitals, but hospital ownership of physicians,” Sandvig said in a statement. “Large hospitals, especially in the past 10 years, have been buying medical groups and clinics. They have insisted on referrals to ‘loyal’ physicians and restricted admissions to their own facilities.”
In the policy journal Health Affairs study, researchers agree: “physicians’ commitment to and pride in their specialty hospitals are powerful positive forces that critics have underappreciated. Encouraging physicians’ involvement in community hospitals’ decision making could address many of the reasons why physicians choose to sponsor their own specialty hospitals.”
Prognosis for doctor-owned hospitals
“No matter what happens in politics, there will always be room for doctors to play a larger role in hospitals and that is what we will always be seeking—ways for doctors to improve care,” says Sandvig. “We will find a way for doctors to play a bigger role in healthcare—a more complete role.”
Meanwhile, the legislative details for healthcare reform are undergoing negotiation, ranging from abortion to Medicare payments to physician-owned hospitals. Even after the 11th-hour abortion compromise, 39 Democrats still voted against the bill, which just passed with a vote of 220 to 215. There were some Democrats who voted against it because it wasn’t liberal enough, and then others said it was too liberal. “This is a very, very controversial bill,” says Larry Sabato, a congressional analyst at the University of Virginia in a Maclean’s article. The healthcare bill is not expected to pass through the Senate quickly.
“There is so much to work out and no one is giving on either side, so it will be a long process,” added Sandvig.
Sources
U.S. House of Representatives: http://docs.house.gov/edlabor/AAHCA-BillText-071409.pdf
Health Affairs: http://content.healthaffairs.org/cgi/content/full/25/1/106#SEC3
New York Times: http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html?inline=nyt-classifier
http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html?inline=nyt-classifier
Physicians Hospitals of America: http://www.physicianhospitals.org/
American Medical Association: http://www.ama-assn.org/
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