Specialty hospitals have a long history in this country, but only recently have doctors shared in the ownership of such facilities, and that has many general acute-care hospitals worried.
In the midst of increased scrutiny of such facilities by regulators and legislators, the Center for Studying Health System Change, a nonpartisan Washington think tank, became the latest group to critique specialty hospitals with a new report released last week.
At a panel discussion accompanying the release of the report, experts said specialty facilities such as children's hospitals and women's facilities have long existed, but the advent of the physician-owned hospital is something that general hospitals only recently have had to contend with, and not very happily so.
"One thing hospitals don't like to do is give up ownership to physicians or investors," said Kelly Devers, a researcher at the center and an author of the report.
As a result, general hospitals have responded in part by building specialty facilities of their own or creating joint ventures with physicians to build such facilities. Indeed, though much of the rhetoric surrounding specialty hospitals has been portrayed as a doctor vs. hospital fight, many of the specialty facilities being built are at least partly owned by general hospitals, particularly not-for-profit hospitals (Sept. 30, 2002, p. 26).
But Devers said that when hospitals build specialty facilities, it almost always is to contend with doctors or an investor group doing the same or looking to do so.
Specialty hospitals have the potential to be moneymakers, but they also carry with them questions about quality of care and overuse of services, the report said. Such facilities also are expensive to build, making them an iffy proposition to hospital administrators who would rather invest in technology or the refurbishing of an existing hospital.
"My sense is that hospitals (build specialty facilities) as a defensive move. It's not something they like to do," Devers said.
In particular, there is a fear that because specialty hospitals often focus on services with high reimbursements, such as cardiac care and orthopedics, they will take patients using those services away from general acute-care hospitals. General facilities rely on such services to subsidize other care with lower reimbursements and caring for the uninsured
William Petasnick, president and chief executive officer of Froedtert and Community Health System, a hospital system in Milwaukee, has been an advocate of greater public disclosure regarding physician ownership of specialty facilities so that patients can be made aware of potential conflicts of interest.
"The debate about specialty hospitals is not about an unwillingness to compete ... my concern is the ability to meet the healthcare needs of a community," he said. In his area, at least three specialty facilities already exist or are planned.
Recently, such facilities have drawn attention in Washington. The U.S. Justice Department and the Federal Trade Commission devoted a panel solely to specialty hospitals as part of their look at competition and antitrust issues in healthcare last month. Earlier this month, Reps. Jerry Kleczka (D-Wis.) and Pete Stark (D-Calif.) reintroduced legislation to limit doctors from referring patients to specialty hospitals in which the doctors are owners. The legislation has not been addressed by a committee.
Regardless of concerns about specialty hospitals, institutional investors continue to look at them with great interest, said Gary Taylor, principal of equity research with Banc of America Securities, predicting that their numbers will continue to increase.
"We're going to see a ton of growth," he said.