Call it an unanticipated consequence of legislation. When the Ohio House of Representatives passed a two-year moratorium on the construction of new for-profit, physician-owned specialty hospitals last month, it intended to halt what it saw as a proliferation of "boutique" hospitals that legislators said threatened the state's not-for-profit hospitals and the healthcare safety net.
Instead, what it got was a plethora of notices of intent to build new specialty hospitals, filed to try to beat the bill's proposed deadline and sneak under its grandfather clause. Now, if all 56 proposed hospital projects qualify for local approval-Ohio no longer has a certificate-of-need program-Ohio could become the specialty hospital capital of the world. While that scenario is unlikely, it could boost membership in the Ohio Hospital Association by nearly 30%, to 226 from 170.
But the OHA is not leaping for joy and embracing potential new members, "because of the impact we believe that this would have on the delivery of healthcare for the entire state," OHA spokeswoman Mary Yost said.
Yost said the avalanche of specialty hospitals would move the state into a system of haves and have-nots, potentially limiting patient access to some kinds of healthcare services and discouraging providers from offering less profitable service lines.
If the bill passes, it would be the first state law to restrict specialty hospitals. At least three other states have considered similar bills, and a federal moratorium or change in reimbursement for specialty hospitals has been debated. Ohio's proposed law would require prospective developers of specialty hospitals to have submitted notification of a project by Sept. 15 or risk waiting at least two more years. The legislation, which moves to the Ohio Senate Oct. 14, would allow specialty hospitals under development by that date to proceed. It's not certain whether the last-minute filings would qualify. The issue could be moot if the Senate fails to pass similar legislation, although hospital association officials said they are optimistic about the bill's chances for passage.
If every project were given a green light, the state would add more than 1,800 beds and experience an unprecedented construction boom worth more than $2 billion, at least according to the preliminary filings. Frank Sossi, a lawyer in the Akron, Ohio-based firm Brennan Manna & Diamond, submitted proposals for 31 hospitals with 1,392 beds and $1.39 billion in new construction. Sossi, who helped launch the controversy over specialty hospitals when he filed a proposal for the New Albany (Ohio) Surgical Hospital last year, said his clients had little choice but to file a notice of intent.
"The House bill trigger for grandfathering the projects is based on who has filed a notice of intent by the deadline," Sossi said. "We had to file the notices to protect the potential for such developments and preserve our rights. We don't want to be precluded from developing hospitals. This is a two-year moratorium. ... And it could stretch beyond that with follow-up studies."
Sossi said his client in most of the projects is a company called Surgical Development Partners of Ohio, a private for-profit company created to form joint-venture partnerships with physicians. All but one of the project notices he filed is slated for 45 beds at a cost of $45 million. Sossi said it's unlikely that all of the projects would be completed but denied that he and his partners merely are setting up franchises or performing the hospital equivalent of claiming Internet site domains.
"Our objective is not to franchise but be a participant in the development," Sossi said.
Sossi declined to name his clients, partners or investors but confirmed that Surgical Alliance Corp., Nashville, and its former president, Eddie Alexander, are involved. Meanwhile, the Medical College of Ohio Foundation said Sossi is representing the school for a prospective orthopedic hospital.
"We saw this as more of a defensive strategy," said Lawrence Burns, the college's vice president of institutional advancement. "We are looking at creating an opportunity for the Medical College of Ohio Foundation." Burns said the foundation would pay for the proposed specialty hospital because the college is a state facility and barred from joint ventures.
Yost said the association is concerned about who is behind the 56 projects. "There's a whole slew of them filed just under the gun and 30 of them are carbon copies," she said. "We don't know who's involved with these. We've argued for a year that we need legislation for these kinds of facilities because the trend would just pick up steam as time goes on."
Ken Hanover, president and chief executive officer of the six-hospital Health Alliance of Greater Cincinnati, said his concern about specialty hospitals isn't spurred by a fear of competition.
"What it's about is conflict of interest," said Hanover, whose not-for-profit system is nearing completion on a $77 million expansion project that includes the Heart Center of Greater Cincinnati at Christ Hospital, developed in part to please Ohio Heart Health Center, a group of affiliated cardiologists. But the 38-physician group later signed a joint-venture deal to build a for-profit heart hospital with Hanover's Cincinnati rival, 187-bed Deaconess Hospital.
Calling the specialty hospital trend dangerous, Hanover said he is concerned about what it portends for the nation's healthcare system. "I would hope that the politicians who think about this clearly would make the right decisions," he said. The Health Alliance is partnering with Cincinnati-based UC Physicians, another physician group, for its own project, the Ambulatory Surgery Hospital, but said it is a not-for-profit, 10-bed joint venture in West Chester, north of Cincinnati.
Health Alliance officials declined to comment on the Ohio Heart decision to partner with Deaconess on the Cincinnati Heart & Vascular Hospital, a proposed 90-bed, $70 million facility in the Cincinnati suburb of Norwood. Ohio Heart Chief Operating Officer Mark McDonald said his group worked with the Health Alliance for two years to build a regional heart center.
"But unfortunately we were not able to come to any satisfactory terms," he said. "After two years of negotiations we weren't much further along than when we began and there was a fair amount of frustration, so we looked to partner with someone else."