As congressional negotiators get set to debate the fate of specialty hospitals in the Medicare reform bill, a General Accounting Office report released today contains both good news and bad news for the industry.
"Specialty Hospitals: Geographic Location, Services Provided, and Financial Performance" on the one hand says specialty hospitals seem to have a significant impact in certain markets, which could fan acute care hospitals' arguments that that the facilities are driving them out of business with unfair competition.
On the other hand, it also finds that only about one-quarter of the physicians who use specialty hospitals have investments in them. That finding may soften concerns that these facilities are mainly used by physician-owners who want to make money from them.
The report is expected to influence negotiations on contradictory House and Senate language on specialty hospitals in the Medicare reform bill that are expected to begin any day now.
The Senate version of the giant bill would bar exclusive physician investments in specialty hospitals, which industry representatives say would end the current building boom of specialty hospitals.
But the House version would not restrict specialty hospitals and only calls for a study to build on the GAO's reporting.
Lobbyists for specialty societies report that negotiators are expected to consider compromise language declaring a moratorium on new specialty hospitals while a study is being prepared, but as of today the topic of specialty hospitals had not yet come up.
The industry opposes a moratorium, which could affect 26 specialty hospitals that are expected to open in the next year or so, representing a growth rate of about 25%, the new GAO report says.
The report says about 100 specialty hospitals are now open, two-thirds of them in just seven states: Arizona, California, Kansas, Louisiana, Oklahoma, South Dakota and Texas.
The GAO concludes that while specialty hospitals have a "small presence" on a national level, "in the communities in which they locate, specialty hospitals may treat a relatively large share of patients who have specific medical conditions or need special medical procedures."
The report also finds that while specialty hospitals tend to be built in areas with population growth, "there did not seem to be a relationship between specialty hospital location and a relative abundance or shortage of local healthcare resources."
Critics argue that by pinpointing small populations in lucrative fields such as cardiac care and orthopedic surgery, specialty hospitals unfairly compete with acute care hospitals, which have to take care of the full needs of the community.
Some GAO findings seem to support that argument. A previous GAO report in April noted that specialty hospitals treat a lower percentage of severely ill patients, and the new report notes that 45% of specialty hospitals operate ERs, compared with 92% of acute care hospitals.
Also, the new report says three-quarters of specialty hospitals are for-profit, compared with 20% of acute care hospitals. But it states that specialty hospitals' margins are similar to acute care hospitals' margins.
The GAO also states that specialty hospitals tend to be more efficient than acute care hospitals outside of Medicare.
"Specialty hospitals tended to outperform general hospitals when the costs from all lines of business and the revenues from all payers were considered," the report says.