The new health care law seemed to spell the demise of physician-owned speciality hospitals, a fast-growing phenomenon in states such as Texas where hospital growth is largely unregulated.
Lawmakers, concerned that such hospitals are emphasizing high-profit services at the expense of caring for low-income populations, effectively barred the expansion of such facilities immediately and the development of new doctor-owned facilities after Dec. 31 by cutting off Medicare reimbursements, a major source of their income.
But like so much else about the new health care law, the fight is not ending there. Rather than retreating quietly into their examining rooms, doctors are challenging the law’s restrictions in the courts and gearing up to fight them in the new Congress.
And they have friends in the new Republican House.
“It is a strength of the American free-enterprise system that people may own their own businesses, and doctors should not be excluded from that right,” says Rep. Joe L. Barton, a Texas Republican competing for the Energy and Commerce Committee gavel.
The nation’s 269 physician-owned hospitals in 35 states have more than 17,000 beds and often specialize in cardiology or orthopedics. To consumers, they probably appear similar to general hospitals, other than their specialization.
But reports, including one by the House Ways and Means staff last year, say the facilities put an inordinate focus on high-profit services, fail to have fully staffed emergency rooms and treat low percentages of Medicaid patients. The American Hospital Association, which represents general hospitals, says research shows that specialty facilities cherry-pick the best-paying customers away from community hospitals.
Doctors who have a financial interest in these hospitals say their facilities allow physicians, rather than corporate owners who increasingly dominate health care, to make decisions about patient care. They also note that they employ more than 76,000 health care workers and deliver high-quality care that patients want.
In addition to their efforts in Congress, the doctors are mounting a legal challenge to the limits in the law. Physician Hospitals of America, a trade group, filed suit June 3 in federal court in Texas arguing that the law should not affect existing or planned hospitals.
The 20-bed Texas Spine & Joint Hospital, owned by doctors, is a party to the suit. The hospital suspended work on a $27 million expansion after the law was enacted, and U.S. District Judge Michael H. Schneider is expected to decide soon whether the case will go to trial next month.
Congress first moved to limit the growth of doctor-owned hospitals in 2003 as part of the Medicare prescription drug law and they have continued to draw criticism from Senate Finance Committee Chairman Max Baucus, D-Mont., and the panel’s top Republican, Charles E. Grassley of Iowa.
As he steered Senate action on the overhaul, Baucus worked to include the restriction, which had also been part of the White House health care deal in July 2009 in which general hospitals agreed to reductions in Medicare reimbursements.
Part of the Rollback Efforts
House Republicans have talked about a “repeal and replace” strategy on the health care bill when they take control in January. But a full-scale rollback is unlikely given that Democrats still control the Senate and the White House.
So the GOP instead plans to target items they find objectionable, and the restriction on physician-owned hospitals is among them.
“It really is a rich environment,” says Rep. Michael C. Burgess, a physician and Energy and Commerce member whose North Texas district includes one of the state’s 81 doctor-owned hospitals.
Republicans say the issue needs a thorough debate, saying that Democrats did not hold hearings on it and arguing that there is scant evidence of irregular referral patterns among the facilities.
So far, there is not much sympathy in the Senate. Finance aides say Baucus is still concerned about patient safety and care in such hospitals when emergencies arise.
The doctors may have an ally, though, in Sen. Dianne Feinstein, D-Calif., who in September 2009 wrote Baucus that it would be “nonsensical” to halt construction on three California hospitals.
Experts who study physician-owned hospitals have reached varying conclusions about their impact on the health care system.
Jean Mitchell, a professor of public policy at Georgetown University, says her research in Oklahoma showed a significant upswing in the number of complex back surgeries performed after specialty hospitals opened their doors. Medicare often pays.
Peter Cram, associate professor at the University of Iowa College of Medicine, says his research showed that among hospitals that specialize in cardiology, outcomes are better for 5 percent to 15 percent of patients. Among orthopedic hospitals, the margin is more significant – outcomes are about 30 percent to 40 percent better.
“It’s just not clear all these hospitals are equal,” says Cram, who still has concerns about doctors owning hospitals But, he says, “Doing away with them en masse is really not the right approach.”
-- Jane Norman, CQ HealthBeat Associate Editor
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