The American Hospital Association said a study it conducted showed that the opening of three specialty facilities in the Black Hills region of South Dakota between 1996 and 2000 financially hurt the area's community hospital and boosted the overall rates of inpatient and outpatient surgical procedures in the community by about 50% and 120%, respectively. The operating margin at Black Hills Surgery Center was slightly over 40% in 2003, while the operating margin for Rapid City (S.D.) Regional Hospital fell to a negative 3.1% in 2004 from a positive 0.8% in 2003, the AHA said. The case study is one of four commissioned by the AHA in collaboration with four state hospital associations in an effort to bolster their argument for an extension of the federal ban on new physician investment in specialty hospitals.
In a preliminary report last week, however, the Medicare Payment Advisory Commission said that while physician-owned specialty hospitals take market share away from community hospital competitors, they do not appear to hurt the community hospitals' profit margins. The future of physician-owned specialty hospitals is contentious. The California Medical Association last week approved a recommendation that it oppose extending the present moratorium as well as "any prohibition on physician ownership, control or governance of specialty hospitals." The American Medical Association will consider a similar proposal at its midyear meeting in December. -- by Michael Romano