The boards of two Columbus, Ohio, health systems have restricted staff privileges for physicians who invest in competing, for-profit specialty hospitals.
Last week the board of Mount Carmel Health System prohibited new physician-investors in for-profit, limited-service hospitals from obtaining staff privileges at the three-hospital Catholic system owned by Novi, Mich.-based Trinity Health. Its action echoed an earlier move by eight-hospital OhioHealth in Columbus, which voted a week earlier to deny staff privileges to any of its physicians investing in for-profit specialty hospitals. The Mount Carmel board's action was effective immediately; OhioHealth won't implement the prohibition until Oct. 1.
As physician reimbursements drop and the costs of medical malpractice insurance skyrocket, physicians are increasingly becoming entrepreneurial in seeking other sources of revenue. The actions by the two Columbus health system boards are indicative of the growing backlash from not-for-profit hospitals and health systems fighting to retain market share and avoid the loss of lucrative business lines to limited-service specialty hospitals. The not-for-profits argue that investor-owned hospitals are answerable only to shareholders and are not obligated by their missions to provide charity care or operate unprofitable product lines like burn units and trauma centers.
The Columbus boards took the action in response to a recent groundbreaking for a 30-bed, for-profit orthopedic specialty hospital slated to open in 2003 in the Columbus suburb of New Albany. The not-for-profit systems worry that physician-investors at the New Albany Surgical Hospital will "cherry-pick" the most profitable cases and refer the costliest and least profitable to them. OhioHealth officials said the new hospital would cut into its most lucrative operations, the profits from which are used to subsidize the $85 million in uncompensated care the system provided last year. OhioHealth estimated it would lose $28 million per year to the new hospital.
Approximately 28 doctors are investing $20,000 to $300,000 apiece in the $38 million, 95,000-square-foot facility. Nashville-based Surgical Alliance Corp. will own 40% of the hospital. The for-profit project was conceived after OhioHealth converted its Doctor's North Hospital to an outpatient center, displacing 18 surgeons. Officials from Surgical Alliance Corp. declined to comment on the dispute.
Similar disputes are occurring elsewhere. In March Central Maine Medical Center in Lewiston informed local cardiologists that they could receive staff privileges at its 16-bed cardiology center if they agreed not to refer patients to a competing cardiac surgery center (April 1, p. 20). Cardiologists there complained that 172-bed Central Maine Medical Center was practicing "economic credentialing," or dictating where doctors may admit patients, which the American Medical Association and the Ohio State Medical Association oppose. The hospital subsequently softened its position.
Officials at OhioHealth and Mount Carmel said they are acting to preserve a fragile community health system.
"Philosophically, we share the view that for-profit, limited service hospitals owned by investing physicians will certainly erode the quality and accessibility of healthcare for our community," OhioHealth President and Chief Executive Officer David Blom said in a written statement. "We hope that, from this shared philosophy, we can come to terms with a solution that enables the board to perform its fiduciary responsibility."
OhioHealth Board Secretary John Zeiger said there is an unavoidable and inherent conflict of interest when physicians own hospitals to which they refer patients.
"They are incented financially to skim the easiest and most lucrative procedures from our facilities. That reduces the revenue we use to provide charity care and other needed services to the community," Zeiger said.
Mount Carmel President and CEO Joseph Calvaruso said the not-for-profit community hospital system that has served the region's poor and uninsured for more than 50 years is in jeopardy because of the New Albany hospital. Calvaruso pointed out that there are no public hospitals in the region, leaving the provision of charity care to the not-for-profit systems.
Calvaruso said it's hard to estimate the financial impact of the new hospital on Mount Carmel because it doesn't know how many investors will use the new hospital and refer patients there. He said the restriction only applies to new physicians seeking staff privileges at Mount Carmel.
"We're taking a positive, proactive approach and hopefully the impact will be minimal," he said. "The physicians who are investors in this for-profit hospital who are currently on Mount Carmel's staff are welcome to remain, so long as they live up to their promises to us that they do not intend to cherry-pick cases from Mount Carmel."
Carl Berasi, D.O., one of the investors in the New Albany hospital, said staff privileges should be awarded based solely on quality of physician care and competence.
"We believe that economic and exclusive credentialing is the beginning of a very slippery slope for all physicians and hospital systems across the United States," said Berasi, who lauded the OhioHealth board's action to defer the prohibition for 90 days until a physician-driven task force can evaluate other options. Berasi said the New Albany hospital would provide quality care at more reasonable prices with better patient outcomes and would treat patients regardless of their ability to pay.
Richard Coorsh, a spokesman for the Federation of American Hospitals, a trade and lobbying organization representing the for-profit hospital industry, declined to comment on the Columbus imbroglio.