Hospitals battle doctor-owned centers

Physicians are opening more specialty hospitals for greater control, but they -- and primary care doctors who refer to the facilities -- might feel a backlash.

By Mike Norbut, AMNews staff. Feb. 10, 2003.

James D. Cash, MD, an orthopedic surgeon in Tulsa, Okla., said full-service hospitals warned him that there would be repercussions if he and other physicians opened a specialty hospital.

That was no idle threat. After the for-profit Orthopedic Hospital of Oklahoma opened in 2001, local hospitals recruited new orthopedic surgeons to replace the ones who pursued the project, Dr. Cash said. Primary care doctors who were hospital employees were instructed to change their referral patterns, and some physicians were dropped from hospital-owned managed care plans. Some insurance companies declined to contract with the new surgical facility, in which about 50 physicians share ownership, because they have exclusive agreements with hospitals, Dr. Cash said.

As physician ownership in specialty hospitals -- such as those focusing on cardiology, cardiac surgery, ambulatory surgery and orthopedic surgery -- becomes more common, so, too, does the chance that doctors may face a backlash from hospitals that feel slighted by their investment in a competitor.

Physicians who invest in specialty facilities see them as a chance to gain clinical and financial control over their work. AMA policy says physician ownership in commercial ventures can provide community benefits, but it cautions doctors against referring patients to a facility in which they have an ownership stake unless they also provide care or services at the facility.

But hospitals see these facilities as cherry-picking their most profitable specialties, leaving hospitals to handle vital -- but money-losing -- specialties such as emergency care.