After a crushing defeat last year in Congress, specialty hospitals are fighting back with a vengeance.
The American Surgical Hospital Association, steamrolled last fall by lawmakers and lobbyists, has launched a $1.5 million lobbying effort-called the "truth campaign"-to persuade Congress not to extend the 18-month ban on new specialty hospitals past the current deadline of May 2005.
In the view of several insiders, the fledgling industry was sucker-punched last year when a multimillion-dollar lobbying effort led by the American Hospital Association triggered a moratorium on new specialty hospitals. The measure, one paragraph in a nearly 700-page law, bars physicians from referring patients to inpatient hospitals in which they hold an ownership stake.
Now, top officials with the ASHA, a San Diego-based association that represents about 65 specialty hospitals, say they will take the offensive with an expensive lobbying campaign that could amount to a struggle for survival.
"We had our hats handed to us with the Medicare prescription drug bill," said Michael Lipomi, president of the ASHA and chief executive officer of Stanislaus Surgical Hospital in Modesto, Calif. "We went to the mat and put together a game plan to address this issue and do what we need to do over the next 18 months to get rid of this (law)."
Lipomi and his colleagues aren't battling just the AHA. Last year, when the moratorium on specialty hospitals took effect, the AHA led a coalition that included the Federation of American Hospitals, state hospital associations and the Coalition of Full Service Community Hospitals, an organization formed last summer specifically to help persuade federal lawmakers that specialty facilities represent a dire threat to community hospitals.
"We know it's an uphill battle," Lipomi said. "It gets down to guerilla tactics. We have to get down in the trenches because the AHA and the federation and the coalition caught us off guard. "
Lipomi said his group's role in the struggle against these larger associations evokes images of "David and Goliath and the American revolution."
"And the encouraging message for us," he said, "is that in each of these instances the truth won out over evil."
Of course, community hospitals don't see it quite that way, arguing that these "partial-service" facilities violate the spirit of the federal law against self-referral by doctors and peel off the most profitable services, threatening the ability of community hospitals to provide a full range of medical care to local residents.
"We believe we're on the right side of this issue," said Cindy Morrison, chief of staff at Sioux Valley Hospitals and Health System, Sioux Falls, S.D., who helped organize the community hospital coalition, which now includes about 180 hospitals in 17 states. "It's our intent to continue shedding light on this issue and continue to be aggressive in a grass-roots effort."
Lipomi's campaign officially kicked off last month during the association's first annual legislative conference in Washington, which brought together officials from nearly all the hospitals represented by the ASHA. He said the group is about one-third of the way to raising its goal of $1.5 million, much of which will be spent on a variety of advertising pushes. But the effort is expected to focus on targeted marketing in Washington-area publications aimed at specific lawmakers.
"We call it the 'truth campaign' because we're trying to bring the real story to our representatives," Lipomi said. "In a nutshell, our key point is that competition is healthy."
He said the AHA and its allies misrepresented the facts in their push for the moratorium last fall, failing to substantiate the contention that specialty hospitals are "cherry-picking" referrals and stripping high-margin services needed to help offset the costs of indigent care and money-losing areas such as emergency room care.
"The overwhelming evidence," Lipomi said, "is that (specialty hospitals) do not impose a threat on community hospitals."
Rick Pollack, the AHA's executive vice president, shrugged off the new lobbying campaign, pointing out that his group probably spent "millions and millions" of dollars on last year's campaign on a wide variety of resources, including lobbyists, a team of outside consultants and the assistance of "thousands" of hospitals at a grass-roots level. He said "at least $100,000" was spent on targeted advertising.
And the lobbying campaign hasn't ended for the AHA, which announced last week that it has formed a new task force to help its members deal with the "challenges" of physician-owned specialty hospitals.
"For us, this is an ongoing effort in terms of working to make sure that the ban gets extended or made permanent," Pollack said. "As far as whether we're concerned (about the ASHA), the kind of resources they're talking about doesn't sound that significant to me when you compare it to our grass-roots army in every congressional district."
About 100 specialty hospitals are now operating in the nation, with 20 to 30 others in some stage of development, officials at the ASHA said. About two-thirds of those are far enough along in the development phase to qualify for exemptions contained in the Medicare legislation. And at least two whose status is uncertain are now seriously considering seeking guidance from the CMS about whether they qualify as being "under development" before the Nov. 18, 2003, deadline, said Scott Becker, a lawyer with McGuireWoods in Chicago who serves as legal counsel to the ASHA.
Becker said the surgical hospital industry was caught slightly off guard during last year's debate over the Medicare bill and was lulled into a false sense that the AHA and its allies were more focused on a battle for additional reimbursements than on shutting down specialty facilities. Next time, he said, the ASHA will be better prepared. "We've got a clearer picture (of the AHA's intentions) now," he said.
The future of specialty hospitals may be determined by another element of the Medicare drug act, which requires the Medicare Payment Advisory Commission and HHS to submit reports on the efficiency, cost and outcomes of specialty hospitals by March 2005.