Physician-owned specialty hospitals: Lifting ban will lift quality of care

The facilities give physicians more control and give patients high-quality care in an appealing setting.

Editorial. Oct. 9, 2006.

"Competition works." Those words uttered last year by William G. Plested, MD, then an AMA trustee and now AMA president, get at the crux of why the recent end of the federal moratorium on physician-owned specialty hospitals is good news for the health care system.

New specialty hospital development was essentially halted in December 2003. The first roadblock was a ban on physician Medicare referrals to specialty hospitals in which they have ownership interest. The second was a hold on Medicare provider numbers for these facilities. The AMA fought against these restrictions. In August, the final barrier fell.

Why is this good news? Specialty hospitals offer patients high-quality care and typically shorter lengths of stay. They also offer choice, and choice fuels innovation. This raises performance across the board and leads to a healthier marketplace.

Critics charge the opposite. They claim that these facilities hurt the system by siphoning off healthier patients, providing only money-making services and presenting doctors with a financial conflict of interest that is bad for patients who see no added health benefits. Meanwhile, they add, community hospitals suffer under the load of sicker patients and money-losing services, such as emergency and burn care.

Statistics and studies undermine these arguments.

First, patients do reap health benefits at specialty hospitals. Orthopedic and cardiac facilities offer lengths of stay 20% to 25% fewer days than community facilities, a 2006 Medicare Payment Advisory Commission report found. Plus, their risk-adjusted 30-day mortality rates were significantly lower than those for community hospitals, according to an article published in the January/February issue of the peer-reviewed policy journal Health Affairs. The authors based the article on findings of a study they conducted for the Centers for Medicare & Medicaid Services.