| Are Physician-Owned Hospitals Doomed? |
By: LYNNE JETER
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Molly Sandvig
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Healthcare Reform Not Death Knell, But Close
Even though colonial doctors pioneered the establishment of hospitals in the United States when they could no longer provide the level of care required of their patients inside office walls, physician-owned hospitals may soon be history.
Healthcare reform passed by the Senate on Christmas Eve doesn’t exactly outlaw physician-owned hospitals, but it definitely puts a damper on new ones being built, and removes incentives for maintaining existing ones.
“It’s clear that the only reason physician hospitals are being attacked is to take away competition in the hospital marketplace,” said Molly Sandvig, JD, executive director of Physician Hospitals of America (PHA). “President Barack Obama acknowledges that competition is healthy in the insurance industry. The same absolutely holds true for hospitals.”
Healthcare reform’s impact on physician-owned hospitals will include displacing patients and forcing them into other hospitals that might not have the capacity to absorb them, therefore delaying care. Physician ownership of hospitals will be limited, reducing patients’ choices. The economic toll of closing these hospitals will result in the elimination of $2.4 billion in total payroll, $509 million in federal taxes, $2.6 billion in trade payables, and will pink-slip 55,000 employees.
Not only would new physician-owned hospitals be prohibited, legislation would quash dozens of hospitals under development that could potentially create 23,000 jobs.
Even with a grandfather clause, existing hospitals would not be allowed to grow to meet market needs. In addition, healthcare reform will make it much more difficult for physicians to buy in to existing hospitals as the aggregate percentage of physician ownership cannot change after the passage of the bill. These provisions are both aimed at eventually turning physician hospitals into dinosaurs of the industry.
Also, physician-owned ambulatory surgery centers (ASCs), a critical point of care for services such as diagnostic colonoscopies, would be impacted by declining reimbursement rates.
The Congressional move comes soon after Consumer Reports revealed that physician-owned hospitals were ranked as the No. 1 hospitals in 19 states. “This is truly noteworthy considering that approximately 20 states don’t have physician-owned hospitals,” Sandvig pointed out.
Across the South, the top two hospitals in Arkansas are physician-owned, as are the top nine hospitals in Louisiana, the leading hospital in North Carolina, and the top three hospitals in Texas, where 16 of the leading 26 hospitals are physician-owned.
“Physician-owned and operated hospitals are clearly among the best in America,” said Sandvig. “This survey should have a significant impact on anyone seriously considering patient satisfaction and quality care as true concerns in healthcare.”
Initially after the Senate passage of healthcare reform, the goal was to have finite details in place before President Obama’s State of the Union address in January. Just before the New Year, word spread that the details would not be ironed out in time.
For now, the effective date for physician-owned hospitals under development to obtain their Medicare Certification has been moved from Feb. 1 to Aug. 1.
“In a nutshell, we’ve been provided six more months,” said Sandvig. “This change reduces the Congressional Budget Office (CBO) score to $500 million over 10 years. Otherwise, the impact remains the same.”
Other healthcare reform highlights concerning physician-owned hospitals:
- Physician hospitals with Medicare Certification in place by Aug. 1, which meet specific requirements within 18 months of the enactment of the legislation, will be grandfathered. The requirements for grandfathering aren’t new and require disclosure of ownership, disclosure of physician coverage, ability to meet EMTALA standards, and other financial disclosure requirements already in place. “There are still 73 hospitals that are currently under development, but will most likely not have been certified by Medicare by August 1, in time to be considered grandfathered,” said Sandvig.
- As a grandfathered hospital, the aggregate percentage of physician ownership cannot be increased after the date of the passage of the bill.
- Also, as a grandfathered hospital, physicians with an investment in one would be required to meet four specific requirements to be allowed to apply to HHS to grow the hospital. If these requirements aren’t met, then beds, operating rooms or procedure rooms cannot be added. “According to our latest study, taking into account every physician hospital we know of, there are no hospitals that are doctor-owned that currently meet each of the four requirements,” said Sandvig. “In other words, none of our physician hospitals will be allowed to grow.” (The House bill, as passed, was amended to include a fifth, stand alone growth provision based on Medicaid percentage requirements. This provision is not in the current Senate language.)
- Finally, under the new language, if a physician-owned hospital doesn’t have its Medicare Provider Number by Aug. 1, its physician owners will not be able to refer Medicare/Medicaid patients going forward. “Obviously, this provision would destroy many of the hospitals that are currently under development, and would leave little room for the future growth of the industry,” said Sandvig.
“Senator Nelson (D-Nebraska) was incredibly helpful, as were several other Democratic Senators who played a direct role by insisting that Senate leadership consider the harm done by the physician hospital provisions,” said Sandvig. “The fact that PR Newswire, MSNBC, and several other media sources are reporting the Senate outcome as a win for physician hospitals is a tribute to how incredibly difficult it has been to engender change of any sort during this Senate process.
“Having said this, we obviously have a long way to go before physician hospitals are appropriately protected.”
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healthcare reform, Molly Sandvig, PHA, Physician Hospitals of America, physician owned hospitals |
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