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Ellen Pryga, AHA Director of Policy

Physician-owned hospitals escaped a likely death sentence in February when Congress dropped restrictions on the facilities from a bill expanding the State Children's Health Insurance Program.

However, physician owners won't have much time to celebrate their seventh defeat of such legislation in the last 18 months.

Ellen Pryga, American Hospital Association director of policy, said the legislation will probably be included in the budget bill a little later this year.

Congress is looking for items that can be cut to pay for expanding other programs, and restricting the specialty hospitals would generate significant savings, she said.

How significant? The Congressional Budget Office has estimated that preventing new specialty hospitals from being built and restricting the expansion of existing facilities would result in $1.2 billion in savings over 10 years.

The Physician Hospitals of America, the lobbying group for the specialty hospitals, said the savings are exaggerated

Pryga said the issue of making healthcare affordable will be important in convincing doubters to restrict physician-owned hospitals.

The election of a Democrat to the White House may also help, she said.

Dr. Thomas B. Flynn, president of The NeuroMedical Center in Baton Rouge, said the never-ending battle and insults from U.S. Rep. Pete Stark, D-CA, and other critics are tiring.

In addition to the SCHIP legislation, anti-physician-hospital legislation has been tacked onto the Farm Bill and the Supplemental War Spending Bill. In January, Stark told the New York Times that the failed legislation would have stopped "the unethical kickbacks" doctors get from ownership hospitals. Stark added that most of these hospitals are of "questionable safety and quality."

Flynn said most of the physicians in physician-owned facilities are perfectly honorable people who want to improve their patients' care, and nothing like Stark's descriptions.

Lots of times, the physicians started hospitals because they were frustrated in not-for-profit facilities, Flynn said.

Flynn believes the most recent legislation was intentionally worded to force physicians to sell their facilities at "fire sale" prices, either to their nonprofit hospital competitors or venture capitalists.

The constant attacks have created a climate of uncertainty, leading some physician-owned hospitals to throw in the towel and sell a major portion of their operations, Flynn said. That's what happened to the Surgical Specialty Centre in Baton Rouge in 2008 with Our Lady of the Lake Regional Medical Center.

"To me it all boils down to fear on the part of the tax-free hospitals. They can't compete with us," Flynn said.

The AHA and other critics of physician-owned hospitals say that the issue is not competition but economics.

Doctors who own hospitals refer more patients to those facilities, Pryga said. By doing so, the doctors get paid for providing care and a facility fee.

The end result is higher utilization rates and higher costs for Medicare and other health insurers, according to the AHA.

In addition, the physician-owned hospitals typically target more lucrative procedures, such as cardiac and orthopedic services, according to the AHA. Those services can account for the bulk of a community hospital's net revenue; siphoning those procedures away can weaken the community hospital's finances, and the community's healthcare safety net.

However, Patti Clement, chief executive officer of The NeuroMedical Center, said a number of studies by the Centers for Medicare & Medicaid Services disprove many of the AHA allegations.

The CMS Study of Physician Owned Hospitals, published in 2005, found that physician referral behavior is not consistent with a financial incentive to increase shareholder value, she said. A study of specialty cardiac hospitals also found that the idea that specialty cardiac hospitals were sending more severely ill patients to general hospitals was not supported.

Clement said critics also downplay or ignore the results of patient satisfaction surveys, which show higher ratings for physician hospitals. Other CMS data have shown the physician hospitals have better outcomes, lower risk from infection and fewer complications, she added.

Pryga said the physician hospitals are overstating their case.

Those facilities have done some things better, some no better and some worse, she said. Readmissions falls into the latter category.

"The thing that you'd have to worry about when there is a significantly higher rate of readmissions is whether the patients are being sent home too early," Pryga said. "Given the significantly shorter lengths of stay in specialty hospitals, you have to wonder about whether those two things are connected."

Pryga also cited a New England Journal of Medicine report that found no difference between the quality of care at cardiac physician-owned hospitals and full-service community hospitals.

Louisiana has 19 physician-owned hospitals with four under development or considering conversion, according to the PHA. The facilities employ the equivalent of 2,758 full-time workers and have an estimated economic impact of $223 million.

The PHA says anti-physician hospital legislation would be economically devastating in Louisiana and nationally. Existing physician hospitals and those under development represent the equivalent of 78,000 full-time jobs.

Tags:

American Hospital Association, CMS, Pete Stark, Physician Hospital Association, physician-owned hospitals, SCHIP

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