Lines are being drawn in the contentious debate over physician-owned specialty hospitals. The Medicare Payment Advisory Commission, which advises Congress on Medicare issues, last week took a step toward smothering the growth of these niche facilities, while the American Medical Association formally endorsed them, approving a policy opposing the extension of an 18-month moratorium on specialty hospitals.
MedPAC released draft recommendations to change the physician referral law to eliminate the "whole hospital" exemption, which allows physicians to refer patients to hospitals in which they hold financial interests. The preliminary recommendation was one of several made during two days of meetings covering a wide array of issues from payments to hospitals and doctors to pay-for-performance assessments. MedPAC's final recommendations are expected next month, but Congress does not have to follow them.
For the hospital industry, MedPAC's recommendation was a gift. Last year's Medicare Modernization Act established an 18-month moratorium that is set to expire in June 2005 on physician referrals to their own specialty hospitals. While the draft MedPAC recommendations urge the elimination of the whole hospital exemption for future specialty hospitals, the commission also recommended that Congress establish a way to allow the exemption for existing ones.
Carmela Coyle, senior vice president for policy at the American Hospital Association, applauded the MedPAC staff and commission, saying their research was helpful "in articulating the problems that physician-owned limited-service hospitals create for full-service community hospitals."
But officials with specialty hospital companies and organizations said they were disturbed. Jim Grant, chief operating officer of Chicago-based National Surgical Hospitals, said he was "extremely disappointed that (MedPAC) staff has decided to discuss options for changing federal law governing financial relationships between hospitals and physicians." Grant, president of the American Surgical Hospital Association, which represents about 70 niche providers, said the association is "encouraging commission members to ignore the staff presentation and consider the extensive data showing the benefits physician ownership brings to healthcare," he said in a news release.
Jamie Harris, the chief financial officer for specialty hospital company MedCath, said the research does not support the elimination of the whole hospital exception.
"We think it would be poor public policy to create more restrictions allowing physician involvement because those will permanently restrict the good opportunities that physicians have to improve quality and address the escalating costs of healthcare," Harris said.
Meanwhile, officials from the AMA's House of Delegates last week approved a policy that "supports and encourages competition between healthcare facilities as a means of promoting the delivery of high-quality, cost-effective healthcare." The California Medical Association endorsed a similar directive several weeks ago, and some other smaller state societies and national physicians' groups appear poised to line up on the side of doctor-owned, for-profit specialty hospitals.
Among its other suggestions last week, MedPAC recommended allowing "gain-sharing" arrangements between hospitals and physicians and urged Congress to establish a quality incentive payment pol-icy for hospitals, physicians and home health agencies.
The commission also made draft recommendations to reimburse hospitals at the full rate of inflation in 2006. According to data presented at the meeting, hospitals are projected to experience a Medicare profit margin of negative 1.5% in 2005 after a margin of negative 1.9% in 2003. The commission, however, recommended reimbursing doctors at the rate of inflation minus 0.8% in 2006, saying there is no evidence that Medicare rates are forcing doctors to leave the program or compromising patient access to care.
At its midyear advocacy meeting, the AMA asked its board of trustees to con-tinue studying liability surcharges designed to defray the skyrocketing costs of physicians' malpractice insurance. Delegates also voted to express their concern to the U.S. Selective Service System over its review of a plan for drafting physicians and nurses, although officials from the Pentagon have said no additional call-up is expected.
Patrick Schuback, a spokesman for the Selective Service System, last week said, "We have not been alerted to any concerns about instituting a medical draft."
Also, the AMA gave its support to the importation of prescription drugs by wholesalers and pharmacies if certain conditions are met to ensure patient safety. "Patient safety must remain the overriding concern as we work to make prescription drugs more available and affordable for patients," said AMA Trustee Edward Langston.