Now that they've helped crack down on specialty hospitals, community hospitals in some states may be targeting an-other one of their prime rivals for lucrative out-patient business: ambulatory surgery centers.
In New Jersey, the state medical association lobbied aggressively for a bill that imposes a tax on all ambulatory surgery centers that are not owned by hospitals, mandating annual payments of 3.5% of gross revenue up to $200,000 (July 5, p. 6).
For community hospitals, the tax, which officials said is one of only two like it now in effect across the country, was another big victory in the fight for market share. Last year, hospital associations persuaded federal lawmakers to impose an 18-month moratorium on physician-owned hospitals as part of the 2003 Medicare bill. In mid-June, meanwhile, Florida went a step further, banning the creation of any speciality surgical facility-doctor-owned or otherwise.
The tax in New Jersey, expected to raise about $31 million in 2005, has triggered considerable discomfort among some officials in the ambulatory surgery business, who wonder if the surcharge will catch on in other state legislatures.
"Of course, we're concerned about tactics like this," said Kathy Bryant, executive director of the Federated Ambulatory Surgery Association, which represents about 1,600 of the estimated 3,900 Medicare-certified centers in the country. "I think one of the key issues is that you are taxing a group to provide a benefit to another group."
She said the tax is a sure sign that her association must step up its lobbying efforts in Washington and statehouses across the nation. "It clearly shows that we need to be more aggressive in getting information out on why these taxes don't make sense," she said.
Despite a trend by many hospitals to join physicians in the ownership and operation of ambulatory surgery centers, the American Hospital Association has adopted an official policy that expresses "concern" about the growth of niche providers, including ambulatory surgery centers. These facilities, according to an AHA position paper, "will undermine access to healthcare services for communities across this country."
Craig Jeffries, executive director of the American Association of Ambulatory Surgery Centers, which has about 300 members representing some 1,500 facilities, said he believes that "Many state hospital associations are taking action" or planning to take action against ambulatory surgery centers. "The overall game plan clearly is emanating from the AHA's policy papers," he said. "But every state is unique. Whether what worked in New Jersey (with the tax) will be a strategy employed in other states is wait-and-see."
The New Jersey tax, part of a broader effort to boost charity-care funding by about 53%, does not apply to hospital-owned surgery centers, said Ron Czajkowski, a spokesman for the New Jersey Hospital Association.
To physicians and key officials in the ambulatory surgery business, the tax is another big hurdle in the struggle for acceptance.
"This bill was basically crafted by the (New Jersey) hospital association, not only as a means to generate revenue for charity care but also a little attack on the ambulatory-care facilities with whom they compete," said John Shaffer, spokesman for the Medical Society of New Jersey. "Not only is this punitive against physicians, down the road it's going to be punitive against patients."
He said several physicians who own ambulatory surgery centers have told him that their taxes will exceed the profit they made last year.
Gary Carter, president and chief executive officer of the 105-member state hospital association, dismissed the suggestion that his group was behind the tax or that it was aimed at thwarting competition.
"Our sole focus and purpose for supporting the tax was to increase charity-care funding," he said.
Like New Jersey, Oklahoma also taxes ambulatory surgery centers to help underwrite charity care at community hospitals, Jeffries said. And a bill similar to New Jersey's is pending in the Georgia Statehouse, according to the New Jersey medical society. Efforts to clamp down on ambulatory surgery centers, Jeffries added, have popped up in Maine and Connecticut, where tougher certificate-of-need restrictions have been imposed; and in Colorado, where an effort to ban physician ownership of ambulatory surgery centers failed to win much support.
Last year, a Florida court overturned a tax on several types of outpatient facilities, including ambulatory surgery centers, clinical laboratories and diagnostic imaging centers. Peter Lohrengel, executive director of the Florida Society of Ambulatory Surgical Centers, which represents about 160 of the state's estimated 300 ambulatory surgery facilities, said the law was ruled unconstitutional because it benefited a single group-community hospitals-at the expense of another-ambulatory surgery centers.