Critics say specialty hospital ban undermines care

The Ohio proposal would also limit a physician's ability to refer patients.

By Katherine Vogt, amednews staff. Oct. 13, 2003.

A proposed two-year moratorium on new specialty hospitals in Ohio has revived debate about whether so-called boutique facilities hog profits to the detriment of general hospitals.

Supporters of the proposal, which is moving through the Ohio Legislature, said the temporary ban will prevent a proliferation of specialty hospitals and allow time to create a committee to study what impact the facilities have on the health care market. But critics, including the state medical association, say the ban would stifle innovation that could lead to better patient care.

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"We've said all along that there is a need for empirical evidence as to whether specialty hospitals can or cannot coexist with the traditional community hospital, and certainly the study committee will help develop that information," said Tim Maglione, director of government relations for the Ohio State Medical Assn.

"But our concern is that we've essentially shut down the innovation and the competition in the interim as we seek answers about the impact of the specialty hospitals on the full-service hospitals. They've created a solution without really defining the problem," Maglione said.

The bill has passed the Ohio House and is expected to move through the Senate in coming months. If enacted into law, it would bar development of new for-profit specialty hospitals for two years. Proposals for new facilities that have already been filed with the state could still go forward. Additionally, it would require the establishment of a committee to study the effects of such facilities on Ohio's health care system.

Another provision of the bill would prohibit physicians with an ownership interest in a for-profit specialty hospital from referring patients to those hospitals for two years unless the facility qualified for grandfather protection, said Mary Yost, spokeswoman for the Ohio Hospital Assn. She said this provision was at the heart of the association's support for the proposal.

About half the states have CON laws for acute care hospitals.

"Where you have the combination of physician ownership and referral power there are two concerns," said Yost. "One concern is the conflict that a physician would be in [in] making a decision for the patient's medical needs and also making a decision that can impact the physician's personal investment. The other concern is the ability to steer profitable patients to a limited-service hospital that the physician may own and leave more complex, more expensive cases to the full-service community hospitals."

But Maglione said the provision would diminish the autonomy of physicians to make treatment decisions that are in the best interests of their patients. "When the government or law indicates that physicians are prevented from sending patents to a particular facility, even if that is the best facility for the patient, that reduces their autonomy," he said.

The question of such referrals has been raised in federal legislation. A bill introduced last spring by Reps. Gerald Kleczka (D, Wis.) and Fortney "Pete" Stark (D, Calif.) would prohibit physicians from referring patients to hospitals in which they purchased an ownership stake at better prices than were available to the general public.

Certificate-of-need laws

The bill advancing in Ohio is believed to be the only proposal of its kind in a state legislature. However, some states have also taken steps to address the surging popularity of specialty hospitals by reviving certificate-of-need laws, requiring evaluation of whether a facility would benefit a community before its development can go forward.

About 26 states have certificate-of-need laws for construction or installation of acute care hospitals, the closest category for comparison, said Richard Cauchi, health care program manager for the National Conference of State Legislatures.

Ohio's certificate-of-need law expired in the 1990s, clearing the way for construction of new facilities, said Maglione. He said there are currently about a half-dozen inpatient for-profit specialty hospitals in Ohio. Yost said dozens more have been proposed.

"The idea for the legislation is to prevent a proliferation," Yost said. "What we have been arguing is that if we do nothing we will continue to see these facilities come on line."

But Maglione said preventing such facilities from being developed could have a detrimental effect on physicians. "It could result in physicians going to those [neighboring] states to be able to be the entrepreneur or creator of a better system because they've been shut out of that in Ohio," he said.