Throwing Out the Good with the Bad

Philip Betbeze, for HealthLeaders Media, January 21, 2008

Isn't there a way to allow the good of physician-owned hospitals (good customer service, modern facilities) while regulating the bad (limited services) and the ugly (poor or nonexistent emergency departments)? A report that was just released from the Health and Human Services' Office of the Inspector General seems to provide but one answer to that question: No.

The report shows that a quarter of such hospitals don't have physicians on site at all times and some do not have a registered nurse to provide critical emergency care. Further, a quarter of such facilities do not have a policy to handle emergencies that happen within their own facilities. What makes it too hard, economically, for such hospitals to provide what they're required to provide? Simple. It's too expensive.

Both major hospital associations have long lobbied against such facilities, mainly on the premise of self-referral. The primary problem created by self-referral is a conflict of interest for physicians who may refer their patients to hospitals in which they stand to benefit financially rather than where they think their patients will get the best care for their conditions. With all due respect, that little issue has not historically been enough to move legislators to consider an outright ban. Sad as it may be that more drastic evidence is needed, patient deaths that result from such facilities' lack of physician coverage or emergency policies has attracted legislators' attention. And that outcome, among others, is in this report--including two recent patient deaths in which the limited-service hospitals, incredibly, called 911 when the patients experienced serious problems on the operating table.

Several years ago, Congress passed a stopgap measure--an 18-month moratorium on reimbursement for new such facilities--to provide time to study the issue. Existing specialty hospitals were grandfathered in. That moratorium expired in June 2005, and limited-service hospitals have continued to proliferate in states that have no certificate of need law.

Doctors, in general, whether they own a piece of a so-called limited-service hospital or not, want what's best for their patients. But like any other profession, medicine has its share of unscrupulous individuals--in this case, physicians who count on luck, a lick and a promise in the hopes that bad things won't happen to their patients because they scrimped on their hospital by not building a money-losing emergency room or full physician and nursing coverage into their business model. These physicians are the proverbial bad apples that spoil the whole barrel.

The weight of Congressional scrutiny is once again bearing down on such facilities, and they might not get off so easy this time. Sens. Charles Grassley and Max Baucus, the ranking member and chairman, respectively, of the powerful Senate Finance Committee, seem ready to strike.

From Grassley: "My primary concern with [specialty hospitals] is the inherent conflict of interest that exists when physicians have an ownership interest in the facilities to which they refer patients. . . I strongly support a competitive marketplace and free market forces, but not at the expense of decreasing access to healthcare for the poor and uninsured or decreasing the quality of care for and safety of patients."

I couldn't have said it better myself. Traditional full-service hospitals shouldn't be expected to clean up others' messes, and patients shouldn't be exposed to physician self-dealing at the expense of their health or lives. It will be interesting to see whether any forthcoming ban on such facilities amounts to closing the barn door after the horse has already escaped.

Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at
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