The ongoing battle in the war between community hospitals and specialty hospitals is heading to the states.
Like the American Medical Association, which is fighting at both the state and federal levels to limit noneconomic damages in malpractice lawsuits, hospitals aren't waiting for Congress to shut the door shut on specialty hospitals.
In fact, if Texas hospital officials have their way, a flurry of proposed laws would place even more restrictions on niche hospitals than the limits already imposed by the federal moratorium that began in December 2003 and is expected to be extended when it ends June 7. One Texas bill would slap a two-year moratorium on these facilities beginning Sept. 1, regardless of what Congress decides.
"Texas leads the nation in these specialty hospitals," said Dan Stultz, a physician who is chairman of the Texas Hospital Association. "Although we appreciate the federal assistance, we need to act on a state level because, in some places, the hospitals are getting clobbered."
For one thing, he said, the federal moratorium applies only to Medicare and Medicaid patients, who are among the least desirable and lowest-paying potential clients. Specialty facilities, he said, concentrate on the big-ticket services and high-end commercial payers, a practice that will ultimately strip community hospitals of the resources needed to underwrite money-losing services like burn units.
Texas is home to about half of the estimated 100 specialty hospitals in the nation. Rapid population growth in urban areas like Dallas and San Antonio and the absence of certificate-of-need laws are partly responsible for the sudden escalation in this sector.
Hospital associations in several states are lobbying lawmakers to curtail specialty facilities. The Washington State Hospital Association supports a moratorium that would last until July 1, 2006. Lawmakers in Kansas and Ohio have considered similar legislation, but no state has yet created its own moratorium to match the federal ban, which directly relates to federal statutes on physician self-referral under the Stark law. Last year, though, a Florida law banned the creation of any new facility that focuses on cardiac care, orthopedic services or cancer treatment, an effort that went even farther than the temporary federal ban (July 5, 2004, p. 6).
State hospital officials are using everything at their disposal to try to stem the tide of specialty hospitals, including legislation requiring all hospitals to have emergency rooms and measures to mandate care for Medicare patients and the indigent, said Carmela Coyle, senior vice president of policy at the American Hospital Association. "Everybody's trying to get to the same objective, and that is to limit the growth of physician-owned limited-service hospitals," she said.
Many of the state initiatives began per-colating before the Medicare Payment Advisory Commission's recommendation in January that the moratorium be extended for another 18 months, said Cindy Morrison, chief of staff at Sioux Valley Hospitals & Health System, Sioux Falls, S.D., and a coordinator with the Coalition of Full Service Community Hospitals.
Charles Bailey, general counsel for the Texas Hospital Association, said his counterparts in several other states also have expressed interest in pressing state lawmakers for changes. The AHA, however, is not directly involved in Texas legislative activities and is not encouraging this wide range of legislative initiatives, said Richard Wade, an AHA spokesman. "We're preoccupied with the national efforts," he said.
The 38,000-member Texas Medical Association, an equally powerful force in state politics, remains opposed to any efforts to limit the ability of doctors to own specialty hospitals or ambulatory surgery centers as long as those facilities follow federal law.
"I don't know what (the hospitals') strategy is with regard to both a state and a national effort," said Spencer Berthelsen, a Houston internist who is chairman of the council on legislation for the TMA. "I don't know what their motivation is in bringing it forward in Texas. But we definitely have (TMA) policy that supports physician ownership of facilities and equipment."
He said the medical association, which supports full disclosure of physicians' financial interests to their patients, will continue to "actively lobby" lawmakers to inform them of their opposition to the hospital industry's legislative initiatives. Surgical hospitals and ambulatory surgery centers provide "greater innovation, lower costs and, in many cases, quality improvement," he said. "If it wasn't for physician investment, the free-standing ambulatory surgery center would never have come into existence."
The THA, which released a study last week saying that specialty facilities are "draining essential resources" from community hospitals by cherry-picking the best patients for high-margin services like cardiac care and orthopedic surgery, is backing about a half-dozen bills that would restrict or outlaw physician self-referral.
While the current federal moratorium restricts the ability of physicians to refer Medicare or Medicaid patients, one piece of legislation in Texas would apply those restrictions to ambulatory surgery centers, which are not currently covered by the congressional mandate (See related story, p. 29). State legislation in Texas also would close the loophole that provides exceptions in some cases for rural specialty hospitals as long as 75% or more of their patients for particular specialty services live in rural areas. About 100 of the estimated 430 acute-care community hospitals in Texas are located in rural areas, Bailey said.
Bailey acknowledged that the highly restrictive bills, which are all in a very preliminary stage, face rough sledding in the statehouse. Most were introduced within the last two weeks and probably won't be considered by committees until April at the earliest.
"Passing any legislation will be tough," he said. "I think the challenge anyone has is that this is somewhat complicated. Some legislators have said, `Well, this is just a competitive issue; we're not interested.' It's very controversial. They don't want to upset the hospitals in their communities. But they also don't want to upset the doctors."