Heart of the matter
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    •  Alan B. Miller
      Looking ahead with optimism as we continue to transform healthcare
      Cable news and the gender gap
      An older man wearing a mask receiving a vaccine.
      Want more diversity in clinical trials? Start with the researchers
      Two travel nurses wearing personal protective equipment.
      Healthcare providers face high costs, demand for agency staff as COVID-19 rages
    • An older man wearing a mask receiving a vaccine.
      Want more diversity in clinical trials? Start with the researchers
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years
      Two travel nurses wearing personal protective equipment.
      Healthcare providers face high costs, demand for agency staff as COVID-19 rages
    • Health suffers as rural hospitals close
      Medicare ACO participants fell in 2021
      Louisiana gets reports vaccine providers are discriminating
      'We know this is real': New clinics aid virus 'long-haulers'
    • Last-minute COVID costs cut into UnitedHealthcare's $396 million operating income
      CMS approves rule forcing insurers to ease prior authorization
      COVID-19 still a big uncertainty for insurers in 2021
      Health insurers' outlook boosted after Dems' Georgia win
    • It's a secret: California keeps key virus data from public
      lacewell_linda_supertinendent_dept_of_financial_services_8.47.jpg
      New York state investigates drug price spikes during pandemic
      Health experts blame rapid expansion for vaccine shortages
      HHS freezes rule targeting community health centers' drug discounts
    • By the Numbers: 20 largest healthcare investment banks in 2020
      Providers await new HHS coronavirus grant reporting deadline
      Operation Warp Speed Dr. Moncef Slaoui, Pfizer Group President Angela Hwang, Moderna CEO Stephane Bancel, CVS Health Executive Vice President Karen Lynch and McKesson CEO Brian Tyler participate in a panel discussion on the COVID-19 vaccine.
      Hospitals, drug companies strive to stand out virtually at JPM
      Intermountain, Trinity, Memorial Hermann behind $300M private equity fund
    • Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years - Transcript
      A man in a room with servers.
      Momentum grows to outsource hospital tech functions in 2021
      5 things to know about Google's $2.1B Fitbit acquisition
    • An older man wearing a mask receiving a vaccine.
      Want more diversity in clinical trials? Start with the researchers
      Avocado
      Avocado a day keeps the doctor away
      50% of Americans make resolutions. Fewer than 27% keep them over time.
      Data Points: Sticking with your resolutions
      U.K. chief scientist says new virus variant may be more deadly
    • Cerner names Erceg as new CFO
      Elizabeth Richter will serve as acting CMS administrator
      Providence names new chief financial officer
      Wisconsin's top health official departing for federal job
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • InDepth Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
      Yale New Haven's COVID-19 nurse-staffing model has long-term benefits
    • Modern Healthcare InDepth: Breaking the bias that impedes better healthcare
      Videos: Healthcare industry executives describe their encounters with racism
      Michellene Davis
      Healthcare leadership lacks the racial diversity needed to reduce health disparities
      Dr. James Hildreth
      How medical education can help fight racism
      Quotes from rebadged employees
      Outsourcing IT, revenue cycle takes toll on internal culture
    • A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      self service station
      COVID-19 pushes patient expectations toward self-service
      Targeting high-risk cancer patients with genetics
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Highmark Health inks six-year cloud, tech deal with Google
      Study: 1 in 5 patients report discrimination when getting healthcare
      HHS proposes changing HIPAA privacy rules
      Android health records app launches at 230 health systems
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      New care model helps primary-care practices treat obesity
      How hospitals are building on COVID-19 telehealth momentum
    • Regional insurers bet big on virtual-first plans
      MedPAC votes to boost hospital payments, freeze or cut other providers
      Most Next Gen ACOs achieved bonuses in 2019
      Congress recalibrates Medicare Physician Fee Schedule after lobbying
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
      Dr. Bruce Siegel
      Why taking a hospital not-for-profit was Dr. Bruce Siegel’s boldest move
    • Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
      Mark C. Clement and David Cook
      We all need to 'do something' to fight inequities and get healthcare right, for every patient, every time
    •  Alan B. Miller
      Looking ahead with optimism as we continue to transform healthcare
      Dr. Bruce Siegel
      By protecting the healthcare safety net, Biden can put us on the path to a stronger country
      Healing healthcare: some ideas for triage by the new Congress, administration
      Dr. Sachin H. Jain
      Medicare for All? The better route to universal coverage would be Medicare Advantage for All
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - Health Care Hall of Fame
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Top 25 Minority Leaders
    • Top 25 Women Leaders
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • Leadership Symposium
    • Healthcare Transformation Summit
    • Women Leaders in Healthcare Conference
    • Workplace of the Future Conference
    • Strategic Marketing Conference
    • Social Determinants of Health Symposium
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala (2022)
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years
      Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
      Next Up Podcast: COVID-19, social determinants highlight health inequities — what next?
      Ceci Connolly
      Next Up Podcast: How to navigate the murky post-election waters
    • Beyond the Byline: Regulators aim to boost value push with fraud and abuse law updates
      An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
      doctor burnout
      Beyond the Byline: How healthcare supply chain struggles contribute to employee burnout
      Beyond the Byline: Covering race and diversity in the healthcare industry
    • Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Chip Kahn
      The Check Up: Chip Kahn of the Federation of American Hospitals
      The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      The Check Up: Dr. Kenneth Davis
      The Check Up: Dr. Kenneth Davis of Mount Sinai Health System
      The Check Up: Dr. Thomas McGinn
      The Check Up: Dr. Thomas McGinn of CommonSpirit Health
    • Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Physicians
December 01, 1999 12:00 AM

Heart of the matter

Cardiologists buy into specialized hospitals

Steven H. Heimoff
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    As low Medicare and HMO reimbursement rates combine to push down the incomes of cardiologists and cardiovascular surgeons, physicians are increasingly ponying up money to build their own heart hospitals.

    Such hospitals are state-of-the-art facilities specializing in one thing and one thing only: cardiovascular services. They are centers to which physicians can refer patients and from which they take a share of the profits.

    For the heart doctors, it's a great deal. They get to practice in an atmosphere conducive to their specialty, have pride of ownership, and see their salaries rise, if and when the hospital makes money.

    But for rival local hospitals with existing heart programs, it's bad news when a heart-only hospital opens down the street. Already struggling to make ends meet, acute-care hospitals cannot afford to lose a single patient, especially heart patients whose health insurance dollars are an important part of many hospitals' bottom line.

    Although only about a dozen heart hospitals have been built around the country, in almost every case where doctors have opened or tried to open a heart-only hospital, intense debate has erupted.

    Usually, the investor-physicians say they are just doing the best thing for their patients. Scott Beau, M.D., a Little Rock cardiologist who invested in Arkansas Heart Hospital with 15 other colleagues, says the doctors' overwhelming motivation "was a desire to take care of patients in a way we think is most beneficial and cost effective."

    The existing hospitals charge them with building unneeded facilities simply to increase their incomes. When cardiologists and cardiovascular surgeons in Albuquerque came together to build the for-profit Heart Hospital of New Mexico, leaders of rival not-for-profit Presbyterian Hospital, which long had run the city's leading heart program, were outraged and have called the new hospital a wasteful duplication.

    When investor-physicians announced they wanted to open a new heart hospital in Dayton, Ohio, opposition from neighboring hospitals was so intense that the Ohio Hospital Association called for a two-year moratorium on new hospital construction. The moratorium never passed the state Legislature, and the Dayton Heart Hospital opened in September.

    When Edward Hospital, in the western Chicago suburb of Naperville, announced plans to build a heart hospital together with local heart doctors, seven nearby hospitals with heart programs waged a battle against the project. One competitor, Good Samaritan Hospital, in Downers Grove, said it could lose $10 million annually, or 35 percent of its volume of heart procedures.

    It's not hard to understand the reason for these turf battles. Heart services have been the bread and butter of community hospitals, accounting for up to 20 percent of a hospital's revenues and 50 percent of its profits. Cardiovascular surgery is the most expensive procedure commonly performed in hospitals, averaging more than $41,000 per incidence.

    The American Heart Association estimates heart disease costs in the United States this year at $183.1 billion. With overall healthcare costs running around $1 trillion, that is almost one of every five dollars spent.

    Peter Snow, senior vice president of strategy development for Presbyterian Hospital in Albuquerque, was one of the leaders in the fight to keep the Heart Hospital of New Mexico from opening, even though he was friends with many of the heart doctors who invested in it. Although Snow is discreet in his criticisms, the meaning of his words is clear enough. The suggestion that the investors were motivated primarily by money "is a legitimate concern," he says, adding, "Physicians respond to the incentives in the system, and there's a strong correlation between increasing use (of a medical facility) and physician ownership, whether it be in labs, diagnostic facilities, or a heart hospital."

    It's too early to tell what impact the new hospital will have on Presbyterian, but Snow worries that the financial hit will be significant.

    Some circumstantial evidence suggests that financial considerations play a part in the decision of a heart doctor to invest in a heart hospital, even if it is not the primary motive. Cardiologists and cardiovascular surgeons, who long have enjoyed some of the highest incomes in medicine, have seen their incomes suffer in the 1990s.

    Beau, the Arkansas cardiologist, says, "Across the board in cardiology, there's been a 9 or 10 percent decrease" in fees paid to heart doctors by Medicare, and he predicts that some cardiology groups will see their incomes plunge by an additional 20 percent over the next several years. While some Medicare fees for cardiac services are up, others have fallen sharply. A HCFA spokesperson, who did not wish to be identified, says, "10 years ago, Medicare paid $3,957 (to the

    physician) for a triple bypass; in 2000, the fee will be about $1,700," as a result of rejiggering of the Medicare physician fee schedule.

    "These surgeons and cardiologists," says Bernard Lirola, a research analyst with the New York investment firm Needham & Co., "have to make up their income loss in some form, so there's a natural migration to get a piece of the facility fee."

    But investor-physicians take umbrage at the suggestion that profit is their primary motive. "This whole notion of mercenary physicians is insane," says Beau. In fact, he adds, "the (Little Rock) investors had to be strongly persuaded they would not lose their shirts." Rather, he says, the physicians acted out of concern for their patients. "The absolute best thing is that we got to design the hospital the way physicians would design it, not administrators."

    The jury is still out regarding incomes, but one thing is clear: Heart doctors call the shots when it comes to which hospital to admit a patient to. And if many or most of an area's heart doctors band together to invest in a heart hospital, it stands to reason they would refer their patients to it, at the expense of the existing hospitals, with whom they may still have admitting privileges.

    Dennis Kelly, vice president for development at the nation's leading developer of heart-only hospitals, Medcath, says the company is studying the effect of "focused factory" care and says a national physician journal will publish the findings sometime early in 2000.

    So far, the bitterness of the turf battles outweighs the actual number of instances in which they've occurred. But the trend represented by the new heart hospitals is unmistakable, and if Medcath has its way, the landscape soon will be dotted with single-specialty heart hospitals from coast to coast.

    Medcath, based in Charlotte, N.C., virtually wrote the rules of the heart hospital game. Ironically, when Medcath started up in 1989, running heart hospitals seemed unlikely for the future of the company. Instead, its strategy was to run mobile and fixed-site catheterization labs. The company opened its first heart hospital in 1996, in McAllen, Texas, and by fall of 1999, it was operating eight.

    The company, which had $275 million in revenues last year, recently announced plans for its ninth and 10th heart hospitals, in Harlingen, Texas, and Sioux Falls, S.D. So far, Medcath has concentrated on smaller cities, but the company is having discussions about opening hospitals in larger metropolitan areas, Kelly says.

    In a typical Medcath deal, heart doctors invest anywhere from $10,000 to $100,000 each, depending on the number of physicians involved and the amount of risk the physician wishes to carry. The average cost of each facility is $50 million. The physicians' return is then prorated according to the size of their investment, if and when the new hospital makes money. Medcath, which reverted to private ownership when two Wall Street investment firms bought its stock back in July 1998, also contributes a share.

    In a few recent instances, so do some of those other local hospitals, whose strategy seems to be, if you can't beat 'em, join 'em. "At first, Franciscan (Medical Center) was opposed to Medcath coming into the Dayton market," explains hospital spokesperson Nancy Thickel, "but then we reviewed our situation and felt it was better to be a partner, so we are now a one-third partner with Medcath" and the local physicians.

    Medcath gives the heart doctors no guarantees of a return on their investment, and the physicians are warned that it could be a few years before they see any profits, given the time it takes to build a facility, market it, and fill its beds. But anecdotally, Medcath is said to tell the physicians they can earn $75,000 or more a year. And there's little doubt that Medcath hospitals quickly rise to the top in their markets once they open. McAllen (Texas) Heart Hospital performed 45 percent of open heart surgeries and angioplasties after its first year. And Medcath's second hospital, Arkansas Heart Hospital, opened in March 1997, has become a leading player. Beau says, "We're doing almost as many (procedures) as the other two hospitals in the city (with heart programs) combined."

    Kelly says Medcath's physicians also can increase their incomes by 20 percent because the facilities are so efficient. "They either get 20 percent more income for working the same amount of hours (because productivity rises) or they have the ability to maintain their professional fees (while) working less hours."

    So far, according to Kelly, only two Medcath hospitals have paid out formal prorated distributions to investors, McAllen and Arkansas, although Kelly would not reveal what the pay-outs were. Beau concedes that his payout was "not an insignificant portion" of his income, but he emphasizes, "I can tell you that the idea behind building the hospital was not driven by the idea of making more money."


    Steven H. Heimoff is an Oakland, Calif.-based writer who specializes in healthcare business topics.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    The Check Up: Dr. Thomas McGinn of CommonSpirit Health
    The Check Up: Dr. Thomas McGinn of CommonSpirit Health
    CommonSpirit partners with Morehouse to train Black physicians
    CommonSpirit partners with Morehouse to train Black physicians
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • InDepth Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Top 25 Minority Leaders
        • Top 25 Women Leaders
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Leadership Symposium
        • Healthcare Transformation Summit
        • Women Leaders in Healthcare Conference
        • Workplace of the Future Conference
        • Strategic Marketing Conference
        • Social Determinants of Health Symposium
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala (2022)
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing