Competition heats up between hospitals, doctor-owned centers

Physician owners of some freestanding facilities say they can't get managed care contracts and may be forced to sell.

By Mike Norbut, AMNews staff. March 7, 2005.

The obstacles appear to be mounting for physicians who have invested in freestanding facilities, as some ambulatory surgery and imaging centers are finding it difficult to secure contracts with insurers.

Physicians say they are being squeezed by exclusive contracts between insurers and local hospitals, which, because of their size, wield considerably more negotiating power than ambulatory surgery centers. It's leaving some physicians scrambling for revenue and considering selling a majority stake in their centers to hospitals just to help them stay financially viable.

"They can't get contracts without the hospital being a major partner," said Kathy Bryant, executive vice president of the Federated Ambulatory Surgery Assn., based in Alexandria, Va. "The irony of this is many physicians opening ambulatory surgery centers would prefer to open them with the hospital, but the hospital tells them no."

In its report on specialty hospitals at its December 2004 Interim Meeting, the AMA Board of Trustees identified exclusive contracts as one of several strategies used by hospitals "to discourage members of their medical staff from investing in competing physician-owned specialty hospitals."

Physicians are no strangers to the backlash doctors face from hospitals that feel their doctors are taking a competitive stance against them. From losing their admitting privileges to losing some referrals because of hospital orders placed on employed physicians, doctors are well aware of the uphill battle they may face just to gain clinical and financial control over their work.