CDU Washington Editor

WASHINGTON Physicians with an ownership interest in specialty hospitals could be barred from referring patients to these facilities if a bipartisan amendment gets added to the final Medicare prescription drug benefit legislation. The amendment, sponsored by Sens. John Breaux (D-Louisiana), Don Nickles (R-Oklahoma), and Blanche Lincoln (D-Arkansas), got a boost late last month with a General Accounting Office (GAO; Washington) report that confirmed what the senators suspect: specialty hospitals such as those focused on cardiovascular care negatively impact services provided by general hospitals.

GAO's report, Specialty Hospitals: Geographic Location, Services Provided and Financial Performance, concluded that specialty hospitals enjoy an average margin more than double that of general hospitals. The GAO also found that specialty hospitals tend to be located in areas with the greatest profit and growth potential, but serve significantly fewer Medicaid patients than general hospitals and in most cases do not have emergency departments.

Investigators examined state policies and local conditions associated with the location of specialty hospitals, how specialty hospitals differ from general hospitals in providing emergency care and serving the community's other medical needs, and how specialty and general hospitals in the same community compare in terms of market share and financial health.

Prepared for the House Ways and Means Committee, the GAO said it conducted the study because of the growth of such facilities. "Advocates of these hospitals contend that the focused mission and dedicated resources of specialty hospitals both improve quality and reduce costs," the GAO investigators wrote. They added, "Critics contend that specialty hospitals siphon off the most profitable procedures and patient cases, thus eroding the financial health of neighboring general hospitals and impairing their ability to provide emergency care and other essential community services."

The GAO identified 100 existing specialty hospitals that focus on cardiac, orthopedic, and women's medical and surgical procedures, saying that they are geographically concentrated in areas where state policy facilitates hospital growth. "Specialty hospitals are more likely to be found in states where hospitals are permitted to add beds or build new facilities without first obtaining state approval for such healthcare capacity increases," investigators wrote.

The seven states with the greatest concentration of specialty hospitals are California, South Dakota, Arizona, Kansas, Oklahoma, Texas and Louisiana.

The GAO report also appears to confirm that specialty hospitals drain Medicare funding away from general hospitals that provide necessary patient services in the community, according to the American Hospital Association (AHA; Chicago, Illinois). AHA supports the addition of the Breaux-Nickles-Lincoln amendment to the Medicare prescription drug bill, according to Rick Pollack, executive vice president of the association. "From trauma and burn to neonatal units, community hospitals stand ready 24 hours a day, seven days a week open to all who walk through their doors, regardless of ability to pay. Specialty hospitals serve significantly fewer poor patients. Their limited role in providing emergency services also means they play a minimal role, at best, in serving uninsured patients," Pollack said in a statement.

Specialty hospitals have average profit margins double that of general hospitals, mainly because general hospitals are responsible for meeting the majority of a community's health needs, Pollack added.

Members of both the Senate and House are being encouraged by AHA to vote in favor of the Breaux-Nickles-Lincoln amendment, Amy Lee, a spokesperson for the association, told Cardiovascular Device Update's sister publication, Medical Device Daily. "AHA would certainly like to see the amendment added to the final bill," she said.

The likelihood of passing the Medicare bill has never been greater, and Congress should redouble its efforts to complete work on the issue this year, Lincoln said. "Congress should not leave for the year without completing work on this bill," she said.

The rapid increase in specialty hospitals hasn't gone unnoticed at the Medicare Payment Advisory Commission (MedPAC; Washington), either. MedPAC, which advises Congress on Medicare payment policy and reimbursement, is scheduled to discuss Medicare's role in physician and hospital reimbursement for specialty hospitals at its December meeting.

"Existing loopholes in the physician self-referral law must be closed. Adoption of a Medicare prescription drug bill amendment authored by Sens. Breaux, Nickles and Lincoln would do just that," Pollack said.

"If left unchecked, the rapid growth of these hospitals will undermine access to a wide array of health services for patients across the country," he said. Congress must act this year to ensure that doesn't happen."

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