The hospital industry is using last week's General Accounting Office report on specialty hospitals to underscore the need for legislators to approve an amendment that would prohibit physicians from referring patients to specialty hospitals in which they own an interest, while specialty hospital lobbyists are calling for more analysis.
The long-awaited GAO report, requested by Reps. Bill Thomas (R-Calif.) and Jerry Kleczka (D-Wis.), concluded that specialty hospitals treated smaller percentages of Medicaid patients, derived a smaller share of their revenue from inpatient services and were less likely to have emergency departments. The findings back up the hospital industry's point that specialty hospitals serve fewer uninsured patients while community hospitals provide vital services to patients regardless of their ability to pay.
"The contention that specialty hospitals treat a more financially favorable selection of patients as compared to general hospitals has added to the debate about the advantages and drawbacks of specialty hospitals," the report said.
The report is the GAO's second this year on specialty hospitals, and its release last week came as Congress considers an amendment on the subject sponsored by Sens. John Breaux (D-La.), Don Nickles (R-Okla.) and Blanche Lincoln (D-Ark.). The amendment, part of the Senate version of the Medicare prescription drug bill, would exclude certain physician-owned limited-service hospitals from the whole-hospital exemption, which enables physicians to make self-referrals to general hospitals in which they have investments.
The provision is being considered by the conference committee that is working to reconcile differences between Senate and House versions of the bill. Last week, Sen. Charles Grassley (R-Iowa) said no agreement had been reached on whether to include the specialty hospital amendment. "We're waiting for data from HHS-you know, specific language," he said.
The final GAO report is "very helpful to policymakers at a critical time," said Carmela Coyle, senior vice president of policy at the American Hospital Association. "Our hope is that it will inform policymakers that we need to curb the growth."
Kleczka, who supports the amendment, said the report reveals the "cherry-picking" ability of specialty hospitals to divert the most profitable patients from general hospitals.
"Clearly these hospitals are not designed to serve all of a patient's needs," Kleczka said. "Instead, they are set up to meet only those needs that can provide the facility with the greatest profit. Until this problem is fixed, the brunt of providing the most costly care will fall to general hospitals."
The first GAO report, released in May, concluded that the number of specialty hospitals had tripled since 1990, patients at the facilities were less sick than those at general hospitals and about 70% of the hospitals had physician investors (May 19, p. 7).
According to the latest report, Medicaid patients constitute 3% of the total number of cardiac patients in specialty hospitals, while accounting for twice that number at general hospitals. Medicaid patients accounted for 8% of orthopedic patients at specialty hospitals and 10% at general hospitals, which acute-care hospital leaders say illustrates their point that specialty hospitals pick the more profitable patients.
Inpatient revenue at specialty hospitals accounted for 45.7% of total revenue, compared with 57.4% at general hospitals. The average financial performance at specialty hospitals also exceeded that of general hospitals, as total facility margins averaged 6.4% at specialty hospitals and 3.1% among general hospitals.
The report, which looked at 100 existing specialty hospitals in 28 states, also found that 45% of them operated emergency rooms, compared with 92% of general hospitals.
Lobbyists for specialty hospitals, who oppose the amendment, tried to minimize the report's conclusions, saying the statistics highlighted by the GAO do not tell the whole story.
Randy Fenninger, the lobbyist for the American Surgical Hospital Association, said the results show that specialty hospitals are not cherry-picking the more profitable cases because Medicaid patients are present at cardiac, orthopedic and surgical hospitals, he said.
"The case they need to make to close our hospitals is that we are going out of our way not to take Medicaid patients," Fenninger said. "This shows we do have Medicaid cases."