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Patient death renews lawmaker focus on specialty hospitals

One senator says the law should require doctors to disclose ownership interest. The Bush administration ponders clarifying hospital staffing and procedure rules for emergencies.

By David Glendinning, amednews staff. March 26, 2007.

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Washington -- Lawmakers opposed to the concept of physician-owned specialty hospitals continue to stay on the offensive more than six months after the government lifted the main barrier preventing new cardiac, orthopedic and surgical facilities from opening.

The Centers for Medicare & Medicaid Services in August issued a mandated strategic plan for regulating the hospitals. Before that, congressional and administrative prohibitions had prevented growth in the industry for nearly three years while policymakers debated whether such facilities were legal, appropriate and beneficial to patients.

But a number of powerful lawmakers on Capitol Hill remain intent not only on stemming the growth of physician-owned specialty hospitals but also on placing more restrictions on existing facilities.

The latest attention follows the death of a patient who received elective spinal disk fusion surgery in January at West Texas Hospital in Abilene. When the patient went into respiratory arrest after the surgery, the hospital staff was unable to resuscitate him and called 911 to transfer the patient to a nearby community hospital, where he later died. The incident sparked a congressional response leveled at all specialty hospitals.

"I am deeply saddened and also completely outraged to hear of another death of a patient at a specialty hospital," said Senate Finance Committee Chair Max Baucus (D, Mont.). "It really seems to me that if you call a place a hospital, it should have the facilities to handle an emergency, but all this facility could do was call 911. This is a strong reminder that doctors' financial stakes in a hospital can cloud judgment and blur priorities, and we can't let that happen."

The American Hospital Assn. and other community hospital organizations argue that the physician owners of specialty facilities cherry-pick healthier patients for higher-paying procedures, dangerously straining community facilities and leaving them to supply emergency care if something goes wrong.

The latest incident is reminiscent of a patient death in 2005 associated with treatment at Physicians' Hospital in Portland, Ore. The owners of that facility have closed the hospital and sold off its assets, but not before lawmakers highlighted it last year as an example of why physician-owned specialty hospitals are harmful to patients and community hospitals.

As Physicians' Hospital did in the Portland case, West Texas Hospital is disputing the contention that it qualifies as a specialty facility. "We are licensed as an acute care hospital, not a specialty hospital, with physicians on our professional medical staff who provide a broad range of services to the community," said Ron Rives, the hospital's CEO, in a written statement. He insisted that the facility followed all state-mandated emergency care requirements and that calling 911 was the appropriate course of action for transferring the patient to an emergency department.

Nevertheless, CMS told the lawmakers that one of its contractors inappropriately had given the hospital the green light for Medicare certification as a specialty surgical facility last June -- before the agency had lifted its prohibition on certifying such facilities. A subsequent survey of West Texas Hospital found numerous patient safety concerns, and CMS announced that it was starting the process of stripping the facility of its ability to participate in the program.

More pressure coming

Whatever happens in this case, supporters of physician-owned specialty hospitals are concerned that community hospitals and their Capitol Hill allies will use even isolated incidents to put more pressure on the industry.

"It certainly gives them more ammunition," said Molly Gutierrez, executive director of Physician Hospitals of America in Sioux Falls, S.D. "It just goes to show that any time anything at all happens at one of our hospitals, we're basically just going to catch it." West Texas Hospital is not one of its members.

Many more preventable and non-preventable deaths occur in community hospitals across the country without sparking congressional investigations, Gutierrez said. Numerous studies have found that mortality rates at specialty facilities are lower than in community hospitals.

Community hospitals have argued that the financial incentives inherent in specialty facilities cause doctors to refer patients for unnecessary, costly and potentially dangerous treatments. A new study by University of Michigan physician researchers appearing in the March 7 Journal of the American Medical Association found some specialty hospitals might be causing an increase in the volume of procedures given to Medicare patients.

In the study, Brahmajee K. Nallamothu, MD, MPH, and colleagues concluded that rates of coronary revascularization services for Medicare beneficiaries were higher over time in areas where cardiac hospitals had opened. The possibility that the financial incentives for physician owners were behind the utilization increase was the chief concern raised by the findings, the authors stated.

Organizations such as the Physician Hospitals of America and the American Medical Association will continue to fight legislative attempts to restrict specialty hospitals or the doctor ownership that they say allows them to function as an attractive care alternative.

"Patients should continue to benefit from increased choice and competition that result from specialty hospitals," said AMA President William G. Plested III, MD. "Focusing on a specific area of service can lead to higher quality and lower costs as a result of more expert and efficient care."

The prospects for passage of stand-alone legislation restricting specialty hospitals is unclear, and lawmakers did not say if they would introduce bills this Congress. But Senate Finance Committee ranking member Charles Grassley (R, Iowa) said current law must be changed at least to require patients be informed when a physician's ownership interest in the hospital might influence care.

In addition, the Bush administration is considering regulatory guidance that clarifies hospital staffing and procedural requirements for emergency situations. Gutierrez noted that any clarification also would apply to community facilities.

Physician investors interested in opening specialty hospitals, meanwhile, are moving forward cautiously. Despite warnings from opponents that the end of the last moratorium would result in an explosion of new hospitals, only about 135 specialty facilities are in operation so far, with another 10 to 15 in active development, Gutierrez said.

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