New Legislation Could Hurt Physician-Owned Hospitals
BY LAUREN UZDIENSKI, JANUARY 22, 2009
Last week the House passed a child-health bill that would place severe restrictions on physician-owned hospitals. These hospitals are frequently criticized for cherry-picking patients, providing incentives for unnecessary tests or procedures and driving up costs at other centers, many of which are non-profit.
Under the new bill, physician-owned hospitals would be prohibited from adding beds or otherwise increasing capacity and Medicare payments to any new doctor-owned hospitals would also be prohibited. The latter would effectively prevent any new physician-owned hospitals from being built. The provision was co-authored by Ways and Means health subcommittee chairman Pete Stark (D-CA), the same Stark who championed an anti-kickback law in 1989 designed to prevent physician self-referral. The Stark law has not applied to physician-owned hospitals.
The Wall Street Journal says that about 85 physician-owned hospitals are currently in development and that there are about 200 open now, mostly in the form of orthopedic or cardiac specialty hospitals.
The controversy surrounding physician-backed centers seemed to be at least partially validated by a 2007 study published by BMC Health Services Research. Using data from 2003, the study compared physician-owned orthopedic specialty hospitals to non-physician-owned orthopedic specialty hospitals. Among other results, the authors found that physician-owned hospitals performed fewer major joint replacements on Medicare beneficiaries than non-physician-owned hospitals; were less likely to be affiliated with a medical school; and were more likely to be for-profit. Patient demographics also varied between centers. Patients who underwent major joint replacement in physician-owned hospitals were less likely to be black and had lower rates of most common co-morbid conditions including heart failure and obesity. Another study published last summer found that referrals for surgery and additional tests and treatments increased significantly when physicians had an ownership stake in the hospital.
Champions of physician-owned hospitals say the centers save the government money on account of lower complication rates, lower infection rates and lower return-to-surgery rates. On the other side of the savings equation, the Congressional Budget Office estimates that if Medicare payments were prohibited to physician-owned hospitals, the government could save $1.2 billion over 10 years.
The success of the bill in the House does not necessarily mean the restrictions on physician-owned hospitals will become law. The Senate's version of the bill does not include these restrictions, and we don't yet know whether a final bill, the one that would go to President Obama, will include the restrictions or not.
