A study sponsored by the American Hospital Association said physician-owned specialty hospitals recorded operating margins 10 times higher than those of community hospitals. The AHA is lobbying Congress for a permanent ban on physician self-referrals to specialty hospitals. A temporary ban will expire in June, but the Medicare Payment Advisory Commission has voted to recommend an extension through December 2006. In the four communities studied, specialty hospitals had operating margins as high as 44%, according to McManus Consulting, Greenwood Village, Colo., which performed the study for the AHA and four state hospital associations. The average operating margin for a community hospital is 3.3%, the AHA said. The study said specialty hospitals achieved high margins by treating patients with better-paying insurance, offering services with higher reimbursement relative to costs and focusing on elective care, freeing them of the costs of maintaining on-site emergency rooms.
Asked for a response to the report, Jamie Harris, chief financial officer of MedCath, which operates 12 heart hospitals with doctors, said, "We think that our model (of care) provides needed services to the community." Read the community case studies. -- by Tony Fong