A study released today by the Center for Studying Health System Change says specialty hospitals appear to be a threat to general hospitals and suggests ways of controlling their growth--such as reducing reimbursements for their services.
HSC, a Washington, D.C., group funded by The Robert Wood Johnson Foundation, focuses "Specialty Hospitals: Focused Factories or Cream Skimmers?" on heart and orthopedic specialty hospitals, which it says are in a building boom.
According to a report cited by the HSC study, more than 50 such hospitals already exist or are in the planning stages. Additionally, HSC reports that 11 specialty hospitals have emerged since 1997 in the 12 local markets that it tracks.
"In theory, using a focused-factory approach in health care can potentially improve quality, increase productivity and lower costs," a release announcing the report states. "But if the payment system is distorted, specialty hospitals can prosper financially without achieving the goals of higher quality and increased productivity."
HSC gathered representatives of physician groups, hospitals, investors and employers to debate the business and policy issues raised by the report.
Noting that physicians are driven by incentives, William Greene, CEO of OrthoArkansas, an 18-physician orthopedic practice in Little Rock, Ark., cautions policymakers against crippling physicians with too much regulation.
"Physicians are reaching out for ancillary income," Greene says. "Ratcheting down procedure payments may result in the abandonment of the market by some of those (doctors). Understanding the motivation of physicians and rewarding the right behavior might be more effective than restricting behavior."
The study identifies three factors that appear to be driving the specialty hospital boom:
- reimbursements for certain cardiac and orthopedic services that are too high;
- physicians' desire for more control over their working conditions; and
- physicians' desire to increase their income by generating more professional fees through increased productivity and capturing a portion of facility profits if they are owners.
"If you don't offer ownership to physicians, you have no competitive advantage," Taylor says.
The study cites several ways to control the growth of specialty hospitals:
- Reducing Medicare payments for cardiac and orthopedic services.
- Passing a bill sponsored by Reps. Pete Stark (D-Calif.) and Jerry Kleczka (D-Wis.) that would force specialty hospitals to open investment to the general public.
- Requiring specialty hospitals to accept Medicaid and indigent patients.
- Requiring the same quality and patient-safety standards for specialty and general hospitals, allegedly because specialty hospitals have lower quality standards.
- Requiring specialty hospitals to have full-service emergency departments.
- Asking states to bring back certificate-of-need processes that limit new construction.