If accepted, a proposed deal to reduce $155 billion in federal healthcare reimbursement in the next 10 years could signal the end of physician-owned hospitals.
On July 8, three hospital lobbying groups—the American Hospital Association, Catholic Health Association and Federation of American Hospitals—released a joint statement approving an agreement with the Senate Finance Committee and White House that would reduce hospital reimbursement by $155 billion over 10 years. For physician owners, the deal is significant because it would place restrictions on physician self-referral to hospitals in which they have an ownership interest, and also place limits on expansion for those hospitals that are grandfathered. The exact terms of the agreement were not released.
Though the deal itself doesn't appear to present much of a direct threat to physician-owned hospitals, what might come after does. “I'm personally not worried about this,” said Molly Sandvig, executive director of the Sioux Falls, S.D.-based Physician Hospitals of America. “I think the entire deal is falling apart. It doesn't put us in a different position,” she added. “Anything we have to see has to go through Congress.”
And that's where the lobbying group is focusing its current efforts, given that the House included language in its reform bill last month that would prevent physician-owned hospitals from expanding; not allow physicians to refer patients to facilities in which they have an ownership interest; and not “grandfather” any hospital that did not have a Medicare certification number by Jan. 1, 2009, which would prevent those facilities from accepting Medicare and Medicaid patients. Sandvig said she believes the Senate will also include language to restrict physician-owned hospitals, but, in the absence of any legislation, that is speculative at this stage.
“From what I do know, it looks like a lot for a little,” Eric Zimmerman, an attorney with McDermott, Will & Emery in Washington, said of the agreement among the hospital lobbies, the White House and the Senate. “For example, physician ownership has been the top priority for the hospital lobby,” he added. “It's always confused me why that's the top priority. It's a little confounding that they would sacrifice so much to get assurance on this issue.”
If included in a final health reform bill, such restrictions would prevent existing physician-owned hospitals from growing and adapting to current—and changing—market conditions, according to John Dietz, chairman of 37-bed Indiana Orthopaedic Hospital in Indianapolis. “It would be a slow death sentence, rather than outlawing us abruptly,” Dietz said. Given the uncertainty on Capitol Hill, Indiana Orthopedic has not yet decided what it will do with the $27 million expansion it has planned for a separate location on the south side of Indianapolis, according to Dietz. It also is holding off on expanding its current hospital, where Medicare and Medicaid reimbursement account for about 46% of its inpatient admissions and about 20% of its outpatient admissions. Charity care accounts for about 1.6%.
Physician Hospitals of America Treasurer Blake Curd is an orthopedic spine surgeon and part-owner of Sioux Falls (S.D.) Surgical Hospital. While Curd said he applauds the efforts of any organization that seeks to reduce the cost of healthcare, he said this particular proposal “reeks of self-interest” if the linchpin for it has something to do with physician-owned hospitals. He also said that limiting a hospital's ability to expand could compromise services at Sioux Falls Surgical Hospital, which has 55 physicians who together have a 49% interest in the 22-bed facility. The majority stake is held by the Toronto-based Medical Facilities Corp.
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