Lawmakers at congressional hearings last week appeared to take the side of general acute-care hospitals in their quest to quash competition from physician-owned specialty hospitals.
While lawmakers said that many questions remain unanswered about the impact specialty hospitals have on nearby community hospitals, legislators expressed grave doubts about the role of niche facilities and some said the "whole hospital" exemption, allowing doctors to refer patients to facilities in which they have ownership interests, needs to be reconsidered.
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Max Baucus of Montana, the ranking Democrat on the committee, are already in the early stages of crafting legislation that would phase out the whole-hospital exemption for specialty hospitals.
The American Hospital Association said hearings held by the Senate Finance Committee and the House Ways and Means Committee's health subcommittee went far toward educating legislators about its members' concerns.
"We've been confident from the start (about our arguments against specialty hospitals) and (last week's) hearings added to the evidence that there are serious concerns about the impact of physician-owned facilities and self-referrals on community hospitals and the services they provide," said Carmela Coyle, senior vice president of policy at the AHA. The association has lobbied to make permanent a moratorium that has halted construction of such physician-owned facilities and to remove the exemption that allowed them to flourish in recent years.
Jim Grant, president of the American Surgical Hospital Association, which represents about 70 specialty providers, acknowledged that his industry is facing an uphill battle in Congress. Grant is also chief operating officer of National Surgical Hospitals, a specialty hospital chain.
"The concern to us particularly in (the Senate Finance Committee) is it appears to us that people had made up their mind even before they heard the facts," Grant said.
The situation is far from resolved, however, said several Washington healthcare analysts. In particular, until Rep. Bill Thomas (R-Calif.), the powerful Ways and Means chairman, weighs in, it is unclear where Congress may go on the issue, said Alec Vachon, a consultant with Hamilton PPB and a former Senate Finance Committee aide.
Neither Thomas nor his staff could be reached for comment by deadline, but during negotiations over the Medicare Modernization Act of 2003-which imposed the moratorium-Thomas chose not to take sides.
"He really tried to let the conference committee work on this on its own," said John Breaux, a former Democratic senator from Louisiana who is now a general counsel for the Washington office of law firm Patton Boggs. A staff member of a Democrat on the Ways and Means Committee who requested anonymity suggested that Thomas' unwillingness to take sides was the reason for the Medicare law's tepid approach to the specialty hospital issue.
The immediate issue before Congress is what should be done about the moratorium, which is set to expire June 8. But the larger issue involves the exemption to the federal law that broadly prohibits physicians from referring patients to services in which they have ownership interests. Last week, many lawmakers expressed deep concern that the exemption gives specialty hospitals an unfair competitive edge over community hospitals.
In his opening statement at the Finance Committee hearing, Grassley said that because physicians have ownership in these facilities, they may steer patients to them to increase profits. "That's troubling," he said.
Rep. Pete Stark (D-Calif.) the ranking Democrat on the Ways and Means Committee, also said he opposes niche hospitals. "I agree with those who say that today's physician-owned specialty hospitals are really nothing more than free-standing subdivisions of a hospital," he said at the subcommittee hearing. He added that he supports the petition recently filed by the Federation of American Hospitals asking HHS to update the whole hospital exemption to exclude specialty facilities.
Since the moratorium was imposed, Congress has been waiting for a study from the CMS and recommendations from the Medicare Payment Advisory Commission for guidance. The CMS study is still unfinished, but last week, Thomas Gustafson, deputy director of the CMS' Center for Medicare Management, offered preliminary findings. MedPAC recommended in January that the moratorium on specialty hospitals be extended for another 18 months. But rather than clarifying the controversy, several legislators at both hearings said the CMS and MedPAC findings have offered little direction.
"I think you all are waffling all over the place," Rep. Sam Johnson (R-Texas) told CMS and MedPAC representatives at the Ways and Means hearing. Johnson was one of the few legislators at either hearing to support specialty hospitals.
According to the preliminary findings from the CMS, Medicare patients treated in community hospitals were more severely ill than those treated in cardiac, orthopedic and surgery hospitals.
MedPAC's recommendation to extend the moratorium would allow the commission to continue studying the issue, MedPAC Chairman Glenn Hackbarth said last week when the commission released a report on the subject.