Medicare, Specialty Hospitals, Doctors and Hospitals - Congress Tries to Tie Medicare Cuts and Specialty Hospital Ownership

A December 9 article in the Washington Post, “Limits Weighted on Physician-Owned Hospitals: Lawmakers Seeing, Curbs on Specialty Facilities to Attach Provision to Medicare Bill,” indicates Congress are trying to tie together a 10.1% cut in Medicare fees, due to be voted on January 1, 2008, with the moratorium on physician owned specialty hospitals.

Congress is playing with market dynamite.


If Medicare cuts go through, AMA surveys indicate 30% of physicians may either close their practices to new Medicare patients or cut back on services. This is the market at work. If physicians can no longer afford to accept Medicare patients, they will simply stop accepting new patients. The cut may have political consequences as well as the rising gorge of aging baby boomers are unable to find a physician who will see them.


If the specialty hospital moratorium is renewed, the market consequences are less clear. The community hospital lobby argues specialists are ‘cherry picking’ profitable heart and orthopedic patients, thereby depriving hospitals of much needed revenue to treat less profitable patients. Specialists, who now “own” some 180 hospitals across the land, argue specialty hospitals provide better care of higher quality with better outcomes, and represent the market at work.


Senator Grassley, R-Iowa, who opposes doctor-owned hospitals, argues:

"My motivation for seeking reforms over a long period of time is the effect that specialty hospitals have on community hospitals when specialty hospitals pass the buck on emergency care and cherry-pick based on profits rather than patient needs."

Pete Stark, Democrat Representative from California, no friend of doctors, weighs in “The major hospitals are more or less being cannibalized.”

On the other side of debate are these statements:

"To say that competition in the hospital business is bad goes against all the factual information that we have," saya William G. Plested III, immediate past president of the AMA, which opposes ownership restrictions. "We have all kinds of data that show that if you have a specialty hospital open up, the first thing that the general hospital will do is to try to improve their quality to compete."

Badr Idbeis, co-founder of Kansas Heart Hospital and president of Cardiovascular Hospitals of America, complains traditional hospitals use their muscle to lure patients, negotiate exclusive agreements with insurers, and pressure doctors not to send patients elsewhere.

Idbeis says physician ownership will lure the best minds to medicine and ensure patient care trumps bureaucracy. Kansas Medical Center has at least one nurse for every four patients, he says, and the hospital has little administrative overhead.

"America made its greatness allowing the market to decide what works and what does not work," he said. "Obviously patients are getting very good care in our hospitals. We should let the market decide what's good and what's bad."

What do doctors outside the specialties involved in owning these facilities think about this issue? My take is that Medicare cuts, which involve all physicians, should not be tied to specialty hospital ownership, which involve only a few specialists.