The emergence of physician-owned specialty hospitals

The attack on ancillary service providers at the federal and state level

The health care delivery system in the United States has witnessed more dramatic changes during the last decade than it had since the passage of Medicare. The managed care revolution and changes in reimbursement for Medicare services have forced providers to look for more efficient ways to provide services as well as for additional sources of revenue- and margin-producing business. The move toward specialized inpatient and outpatient facilities, often owned by physicians, is a natural reaction to these significant changes. These developments have resulted a "turf war" between physicians and hospitals over who should control these revenues.

Utilization changes following market entry by physician-owned specialty hospitals

Physician ownership of specialty hospitals has become commonplace in recent years in several states where certificate-of-need laws do not exist. The study examines trends in utilization rates for complex and simple spinal fusion procedures performed on injured workers with back/spine disorders in two markets in Oklahoma. During the time period we examine, physician-owned spine or orthopedic specialty hospitals entered both market areas in Oklahoma. Because there were no market areas in Oklahoma without physician-owned spine or orthopedic hospitals to use as a comparison group, we also analyzed trends in utilization for these surgical procedures performed on Medicare beneficiaries. We compared utilization for these procedures in Oklahoma and three other states with a high concentration of physician-owned specialty hospitals (Kansas, South Dakota, and Arizona) to utilization rates for back surgery performed on Medicare patients who reside in the Northeast region. States in the Northeast constitute an appropriate control group because there are no physician-owned specialty hospitals in this region. Both analyses indicate that the entry of the physician-owned specialty hospitals was followed by substantial increases in the market area utilization rates for complex spinal fusion surgery. Conversely, such dramatic changes did not occur in the Northeast where physician-owned specialty hospitals do not exist. After considering but ruling out alternative explanations, the findings imply that the financial incentives linked to ownership coincided with significant changes in physicians' practice patterns.

Acute Myocardial Infarction and Congestive Heart Failure Outcomes at Specialty Cardiac Hospitals

Background— Outcomes of patients with acute myocardial infarction (AMI) and congestive heart failure (CHF) at specialty cardiac hospitals are uncertain.

Methods and Results— From 2003 Medicare data, we used hierarchical regression to calculate 30-day standardized mortality ratios and risk-standardized mortality rates for AMI and CHF at 16 cardiac and 121 peer general hospitals in 15 healthcare markets. We then compared cardiac and general hospitals by determining (1) the proportion of facilities with statistically higher, no different, or lower than expected mortality based on 95% interval estimates of standardized mortality ratios and (2) differences in risk-standardized mortality rates between the types of facilities after stratification within healthcare markets. We identified 1912 patients with AMI and 1275 patients with CHF at cardiac hospitals and 13 158 patients with AMI and 18 295 patients with CHF at general hospitals. Patients at cardiac hospitals were younger, were more likely to be male, and had a much lower prevalence of noncardiovascular diseases. After adjustment for patient differences, standardized mortality ratios were significantly better than expected for 4 (25%) and 5 (31%) cardiac hospitals for AMI and CHF, respectively, compared with 5 (4%) and 6 (5%) general hospitals. Risk-standardized mortality rates were modestly lower at cardiac hospitals (15.0% versus 16.2% for AMI, P <0.001, and 10.7% versus 11.3% for CHF, P <0.01).

Conclusions— Patients with AMI and CHF at cardiac hospitals differ considerably from those at peer general hospitals. Although outcomes were modestly better at cardiac hospitals, substantial variation was noted across individual facilities.

Spillovers And Vulnerability: The Case Of Community Uninsurance

This paper studies the uninsured as a vulnerable population. We contend that reducing the size of the uninsured population yields important spillover benefits to the insured population, benefits that go beyond a lower charity care burden. Evidence presented in this paper reinforces studies in the literature that show that problems of health services quality and access facing insured people increase when the proportion of uninsured people in their local communities is greater. The size of such spillover benefits is reduced if the local market is large enough to be segmented based on insurance status.

Effects of physician-owned limited-service hospitals: evidence from Arizona

In recent years physician ownership of so-called limited-service hospitals has become commonplace in many states lacking certificate-of-need regulations. Empirical evidence documenting the effects of these facilities is sparse. This study compares practice patterns of physician-owners of limited-service cardiac hospitals and physician-nonowners who treat cardiac patients at competing full-service community hospitals. Analyses of six years of Arizona inpatient discharge data show that physician-owners treat higher volumes of profitable cardiac surgical diagnosis-related groups (DRGs), higher percentages of low-severity cases, and higher percentages of cases with generous insurance compared with physician-nonowners who treat cardiac patients in community hospitals.

U.S. Trends In CABG Hospital Volume: The Effect Of Adding Cardiac Surgery Programs

Hospital coronary artery bypass graft (CABG) volume is inversely related to mortality--with low-volume hospitals having the highest mortality. Medicare data (1992-2003) show that the number of CABG procedures increased from 158,000 in 1992 to a peak of 190,000 in 1996 and then fell to 152,000 in 2003, while the number of hospitals performing CABG increased steadily. Predictably, the proportion of CABG procedures performed at low-volume hospitals increased, and the proportion in high-volume hospitals declined. An unintended consequence of starting new cardiac surgery programs is declining CABG hospital volume--a side effect that might increase mortality.

Professionalism and medicine's social contract with society

Medicine's relationship with society has been described as a social contract: an "as if" contract with obligations and expectations on the part of both society and medicine, "each of the other". The term is often used without elaboration by those writing on professionalism in medicine. Based on the literature, society's expectations of medicine are: the services of the healer, assured competence, altruistic service, morality and integrity, accountability, transparency, objective advice, and promotion of the public good. Medicine's expectations of society are: trust, autonomy, self-regulation, a health care system that is value-driven and adequately funded, participation in public policy, shared responsibility for health, a monopoly, and both non-financial and financial rewards. The recognition of these expectations is important as they serve as the basis of a series of obligations which are necessary for the maintenance of medicine as a profession. Mutual trust and reasonable demands are required of both parties to the contract.

EMTALA and the Ethical Delivery of Hospital Emergency Services

This article examines the role and impact of EMTALA on the ethical delivery of hospital-based emergency services, primarily through close inspection of three of the core EMTALA mandates: the medical screening examination, the duty to accept patients in transfer from less capable facilities, and the requirement that the hospital provide on-call physician services to the emergency department to help stabilize patients with emergencies or help accept patients in transfer. Hospital and physician responses to these mandates, such as triaging/screening patients away from the emergency department, avoiding the application of EMTALA, refusing to accept inpatients with emergencies in transfer, and devising ways to avoid on-call duties, are analyzed in some detail.

Do physician-owned cardiac hospitals increase utilization?

This paper looks at whether physicians' investment in heart hospitals during 1997-2001 was followed by an increase in the number of relatively profitable cardiac surgeries paid for by Medicare or in a shift toward operating on healthier (more profitable) Medicare patients. Although markets with physician-owned hospitals had slightly above-average growth rates in profitable cardiac surgeries during this period, the magnitude of the increase was small and statistically significant only for bypass surgery. There was no increase in the proportion of surgeries performed on healthier patients. These findings contrast with earlier studies of less-invasive services such as diagnostic imaging.

Principles and process in the development of the Mayo Clinic's individual and institutional conflict of interest policy

In 1995, federal regulations required all academic medical centers to implement policies to manage individual financial conflict of interest. At the Mayo Clinic, all staff are salaried, and all medically related intellectual property from the staff belongs to the clinic. Hence, it was necessary to develop a policy for institutional conflict of interest to complement the policy for individual conflicts of interest. This article addresses the principles and process that led to the development of the Mayo Clinic's policies that guide the management of conflict of interest of individuals and of the institution. Empowered by the Bayh-Dole Act, the Mayo Clinic participates in technology transfer through its entity Mayo Medical Ventures. Individual conflicts of interest arising from such technology transfer are associated with Institutional conflicts because all individual intellectual property belongs to the institution, per clinic policy. This policy addresses conflicts of interest that arise in research, leadership, clinical practice, investments, and purchasing. Associated with the statutory annual disclosure on personal consulting and other relationships with Industry, which are guided by federal regulations, all research protocols or grant applications require financial disclosure on initial submission and in annual progress reports. The clinic's Conflict of Interest Review Board was established to review each disclosure and recommend management of individual and institutional conflicts of interest according to policy.

Specialty Versus Community Hospitals: What Role For The Law?

U.S. health care has long featured a struggle between regulation and markets as vehicles of reform, and the community hospital is at the center of this struggle. The key to its financial viability is cross-subsidization, whereby revenues from insured patients subsidize the care of the uninsured and underinsured, and profits from well-compensated services support those operating at a loss. Cross-subsidization has been challenged by efforts to move highly compensated services and well-insured patients to ambulatory surgical centers and specialty hospitals. We review the ongoing battle between through a legal lens and offer conjectures about the outcome. Refined certificate-of-need regulation may be the preferable policy choice.