Congress eyes boutique hospital backers

The legislation reflects concerns that specialty facilities hurt community health care by drawing the most profitable services away from general hospitals.

By Markian Hawryluk, AMNews staff. May 12, 2003.

Washington -- The days of boutique buying by doctors may be numbered.

But lawmakers and regulators aren't targeting doctors' shopping habits. They are trying to limit physician investing in boutique, or specialty, hospitals. These facilities focus on a narrow set of procedures, most often cardiology or orthopedics.

Proponents say this approach can improve efficiency, reduce costs and lead to better outcomes. But a growing number of critics maintain that these hospitals skim the most profitable of procedures, leaving full-service hospitals holding the bag.

"To remain economically viable, community hospitals will have no choice but to close unprofitable units and boost their fees, which will hurt patient care and contribute to skyrocketing health care costs," said Rep. Jerry Kleczka (D, Wis.).

Lawmakers are most concerned that specialty hospitals pursue investment from physicians in a position to refer their patients to the facilities.

"We enacted laws strictly limiting physician self-referral because we know that physician ownership affects physician behavior, leads to overutilization of services, and sometimes the provision of unnecessary or inappropriate care," said Rep. Fortney "Pete" Stark (D, Calif.). "Now the same phenomenon is occurring in the boutique hospital industry."

Many critics of physician investment in specialty hospitals say the arrangements are not illegal but only because of a loophole that violates the intent of federal anti-kickback laws.