Some providers are using last week's General Accounting Office report on specialty hospitals to build a case for enacting legislation that would regulate these hospitals more carefully to prevent conflicts of interest between physicians and the hospitals in which they invest.
The GAO report, requested by Reps. Bill Thomas (R-Calif.) and Jerry Kleczka (D-Wis.), concluded that the number of specialty hospitals has tripled since 1990, patients at the niche providers were less sick than those at general hospitals, and about 70% of the facilities had some physician owners.
"Concerns have been raised by general hospitals and others in the healthcare community that specialty hospitals are siphoning off the most financially rewarding portions of general hospitals' business," the report said.
The report, which took one year to complete and analyzes 92 specialty hospitals, comes at a time when 20 additional facilities are on drawing boards around the country.
"It's impossible to ignore a report like this," said George Lynn, president of AtlantiCare Health System, Egg Harbor Township, N.J. "We need to have standards apply equally. They need to be uniform across all hospitals.
"When you have physician ownership, there is an economic incentive for them to send well-insured patients to specialty hospitals," he said.
But specialty hospital representatives are saying the GAO and the American Hospital Association, which formed a task force to study the issue, are exaggerating the impact specialty hospitals have on community hospitals.
"The specialty hospitals are being targeted. There is no question about it," said Randy Fenninger, the lobbyist for the American Surgical Hospital Association, which represents 50 specialty hospitals. "We have argued that the typical patient in surgical hospitals looks very much like the patient in a community hospital."
The GAO report, however, illustrates the need to create amendments to the federal regulations, known as the Stark laws, which govern conflicts of interest between physicians and hospitals, Lynn said. Under the regulations, physicians are prohibited from making self-referrals to hospitals in which they have financial stakes.
Kleczka and Rep. Pete Stark (D-Calif.) have introduced a bill that would plug a loophole in laws governing physician-owned hospitals. Under that proposed legislation introduced last month, doctors could still invest in specialty hospitals and refer patients to them, but only if the investment opportunities were open to the general public (April 7, p. 9). At least 12 states in the last year have considered legislation relating to specialty hospitals, including outright bans on physician referrals to facilities in which they have a financial stake (May 12, p. 5).
Physicians are getting around the original Stark laws, Lynn said, by using the "whole-hospital exemption," which enables doctors to invest in the general hospital because their investment in the large organization would be too diluted to significantly benefit any particular physician.
Because specialty hospitals are considered part of the larger whole hospital, the doctors can invest in and refer patients to those facilities.
"We need to define what a whole hospital is," Lynn said. "I don't think any sweeping legislation is needed. Our goals are to try creating a more level playing field."
But Fenninger said the study does not back up the claim that physicians are reaping the benefits of investing in specialty hospitals by referring their own patients. The average share owned by an individual physician was more than 2% at half the hospitals and less than 2% at the other half, according to the GAO report.
"Doctors go to these systems because of the high quality of care for their patients and the efficiency is very high," Fenninger said. "Most doctors say they can do twice as much work. We are not cherry picking."
The difference in the number of severely ill patients treated at specialty hospitals and community hospitals is also marginal, Fenninger said. The GAO compared 2000 discharge data at 25 specialty hospitals in six states with data at 396 general hospitals in the same urban areas. Community hospitals saw 2% to 5% more severely ill patients than their specialty counterparts in cardiac, orthopedic, surgical and women's cases, according to the report.
"That is not a difference worth arguing about," Fenninger said. "Community hospitals and specialty hospitals are seeing the same kind of patient."