Specialty Facilities Don't Threaten General Hospitals, Study Says

Karen M. Cheung, May 15, 2009

Oftentimes, there exists a contentious feud between supporters and objectors to specialized institutions that cater to a lucrative payer mix. Despite ongoing criticism that specialty hospitals that focus on profitable cardiac and orthopedic services would divide the haves and have-nots, a recent study found that isn't necessarily the case.

In fact, specialty facilities do not threaten surrounding general hospitals and safety net hospitals, according to General Hospitals, Specialty Hospitals, and Financially Vulnerable Patients from the Center for Studying Health System Change (HSC).

"Although the specialty hospitals initially presented challenges to general hospitals, general hospitals didn't feel the impact in their ability to care for financially vulnerable patients," says Alwyn Cassil, director of public affairs at HSC.

Some speculated that these specialty services cater to an elite payer mix, that is, low-acuity patients that can afford elective surgeries from Medicare and private insurance. They argued that general hospitals were left to take care of under- or uninsured patients, hurting their revenue. However, the study found that specialty hospitals do not pull patients, or physician specialists, from general hospitals or safety net hospitals.

About the study
Researchers surveyed three markets in Indianapolis, Phoenix, and Little Rock, Ark., between March–June 2008. Although "these three markets are not representative of all areas that have specialty hospitals," admits Cassil, the study does present interesting data about what is on the minds of leaders at general hospitals.

One survey respondent said if he were to name the top five challenges to general hospitals, specialty competition wouldn't be on that list, according to the study. General hospitals are worried more about the economy than patient or recruitment competition from than their specialized counterparts. They witnessed little change in patient acuity because of a national rise in uninsured patients overall rather than losing out to specialty services.

Government intervention
In the past decade, hospitals have elected to pursue profitable service lines with specialized care. In 2003, Congress placed an 18-month Medicare moratorium on physician self-referrals to new specialty hospitals with the goal of halting facilities in which physicians had a financial interest. However, this "paradoxical step" created disproportionate payments for existing physician-owned institutions, according to Richard Rohr, MD, MMM, FACP, director of hospitalist programs at Guthrie Healthcare System, Sayre, PA and blogger for HospitalistLeadership.com.

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