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Doctor-Owned Specialty Hospitals Faulted in Study

Despite Congressional support, they fare no better than community hospitals

WEDNESDAY, April 6, 2005 (HealthDay News) -- Specialty hospitals, often partly owned by physicians who refer their own patients to them, are no better at cardiac procedures than ordinary community hospitals, a new study claims.

The finding could have political implications: An 18-month moratorium on the establishment of new specialty hospitals, approved by Congress in the law that set up the Medicare drug benefit plan, is about to expire.

Extension of the moratorium has become a divisive issue on the Hill, with many Republicans favoring more of these types of hospitals as a market-based solution to medical cost problems, while many Democrats oppose them on the grounds that self-referral by doctors to their own hospitals equals unfair competition.

The study, published in the April 7 issue of the New England Journal of Medicine, acknowledges that specialty hospitals have produced findings that would indicate better care -- such as lower death rates and shorter hospital stays.

But those numbers are deceptive, said Dr. Peter Cram, an assistant professor of medicine at the University of Iowa, who led this latest study of more than 42,000 Medicare patients undergoing cardiac procedures.

"There are three main findings," Cram said. "First, specialty hospitals are admitting patients who are healthier and wealthier. Second, these hospitals do many more bypass surgeries per year than local general hospital competitors. Third, after accounting for [these] differences in patient characteristics and volume, there are no statistically significant differences in outcome."

Cram noted that the Medicare Payment Advisory Commission (MedPAC) has reported that while specialty hospital patients usually are discharged faster, "they do not have lower costs for Medicare patients than community hospitals."

Representatives of both the American Hospital Association, which includes more than 4,200 nonprofit hospitals, and the Federation of American Hospitals, which includes 1,700 investor-owned facilities, said the study supports their endorsement of extending the moratorium.

"What this study continues to reinforce is the idea that there aren't any really significant contributions coming from this particular delivery model that would warrant the kind of extreme treatment they get under government regulatory and payment policy," said Ellen Pryga, director of policy for the American Hospital Association.

The moratorium will expire on June 8 unless Congress acts, Pryga said, "and I think there are a pretty significant number of these [specialty hospitals] waiting in the wings for the moment when the moratorium expires."

Specialty hospitals hurt community care overall, Pryga charged, because "they are taking the less acutely ill patients and leaving us the more acutely ill."

Charles N. Kahn III, president of the Federation of American Hospitals, said the report "is consistent with other evidence that there is selection of patients going on" by specialty hospitals.

"The paper clearly indicates that selection is clearly taking place that is inappropriate," Kahn said. "They are selecting patients in two ways -- selecting patients who are healthier and have insurance and avoiding patients on Medicaid."

One possible solution to the issue, Cram said, comes from a recent report by MedPAC, "which suggested that many of these market inefficiencies could be fixed if the payment system more directly linked the sickness of patients to reimbursements. The focus on lower-risk patients could be eliminated by reforming the payment system."

But such a reform would be complex and difficult to accomplish, he said.

More information

The issue of specialty hospitals is discussed by the U.S. General Accounting Office.

SOURCES: Peter Cram, M.D., asociate professor, medicine, University of Iowa, Iowa City; Ellen Pryga, director, policy, American Hospital Association, Washington, D.C.; Charles N. Kahn III, president, Federation of American Hospitals, Washington, D.C.; April 7, 2005, New England Journal of Medicine
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