FierceHealthcareFierceHealthITFierceHealthFinanceHospital Impact   FierceSarbox
About | Sample | Privacy

Physician-owned hospitals: Are they the boogeyman?

Tools
Tags
community benefit
Vertical Integration
physician practices
Physician Hospitals Of America
Health Systems


Folks, before you hit that "compose e-mail" button, let me say that nobody needs to give me a lesson on the problems that can arise when physicians operate or own a substantial part of a hospital. In particular, I'm convinced that it's important to keep an eye on the issue of physician self-referral, given the myriad of problems that occur when anyone, physician or otherwise, has an incentive to put making money over patient interest.

That being said, I thought you might be interested in a recent column by Molly Sandvig, JD, the executive director of trade group Physician Hospitals of America. (OK, I can hear the hospital execs in the audience saying "Boo! Hiss!" Calm down, guys...)  In her recent piece, for financial publication Inside ARM, Sandvig offers a few observations and stats that are worth reviewing:

* Health system investment in physician practices, with the assumption that the practices will refer to systems' hospitals, is a form of self-referral

* Physician hospitals generate a net community benefit almost 8 times higher than non-profit hospitals, averaging 7.23 percent as opposed to .87 percent for non-profit hospitals

* Physician-owned hospitals are more agile because they're smaller, and higher quality because they're run by clinicians

* Despite popular perceptions, utilization and costs don't rise just because a physician hospital appears in a market

Of course, one can raise many questions in response to her arguments--though in all honesty, I think she may have a point when it comes to vertical integration by health systems. For one thing, maybe one physician hospital doesn't move the needle on utilization, but what happens when several enter a market or even dominate it? What evidence is there that physician hospitals offer higher quality? How does she define "net community benefit"? Can she really suggest with a straight face that specialty hospitals' CEOs focused on high-margin elective procedures are propping their doors open to accept uninsured folks? And so on.

What questions would you ask Ms. Sandvig, readers? And do you agree with any of her arguments? I'd love to hear from you. Please feel free to write to me and let me know what you think. - Anne

Comments

Regarding self-referral by phsyicians, Sandoval is wrong:
1. Many hospitals employ physicians and incur sigificant losses doing so. The spinoff contribution margin is used to fund hospital operations and does not flow back into physicians pockets. The analogy does not hold.
2. Absent any standard for qualifies as "community benefit' some hopsitals claim capital expenses on building as community benefit. In sprit, community benefit is supposed to be charity care. How much true charity do these hopsitals provide?
3. Agile, perhaps. Better quality? Prove it. According to the Commonwealth Fund, the US is now dead last among industrialized nations for quality.
4. The realtionship between physician self-referral and utilization is not a "popular perception" it is an ironclad, irrefutable fact confirmed repeatedly in multiple studies over decades. Dr. Mitchell's most recent study (July, Medical Care) merely corroborates what has been proven ad nauseaum.

Physician onwership of ASC's, imaging centers and specialty hospitals, often in partnership with device manufacturers results in undeniable increases in utilization, much of it inappropriate and uneccessary. It is a totally transparent manifestation of physician greed and soils the noble heritage of our profession. It is ironic, that the most highly compensated among us, (orthopods, neurosurgeons and cardiovascular surgeons) who are already earning millions from their practices need even more. They are lining their pockets at taxpayer expense while pushing the nation ever deeper into debt. This too shall pass and one day our profession will be puged of those who have forgotten the Oath.

The "anonymous" post has no credibility at all because, unlike Ms. Sandvig, the writer is not willing to sign it and let you know his/her bias (I don't have any personal stake). There are quality issues in all types of hospitals, though specialty hospitals generally score higher. But only the big corporate hospitals are threatened by the growth of specialty hospitals that provide patient choice (and threaten their local monopolies). Their effort to deny physicians the right to own hospitals is un-American. If you have a college degree in that, you're not allowed to own a business? You can't own a business you are actually qualified to run? "Anonymous" must be someone connected to an existing hospital who feels threatened by the entry into the free market of competition. Any of your readers who do not understand that competition drives prices down and quality up should return to school for a quick refresher course in basic middle school economics.

All interesting comments but to me this issue is quite simple. Why do we allow physicians to self-refer to entities where they have a financial interest and will receive a personal financial gain by the referral? We do not allow attornies to do this nor do we allow accountants and other professionals. Look at the mess that Anderson had at Enron by auditing thier own subsidiary consulting advice. Would we allow our government officials to refer business/contracts (undisclosed I might add) to businesses in which they have an interest? The answer is simple. No! This self-referral is a horrible conflict of interest and should not be allowed, period!

Post new comment

The content of this field is kept private and will not be shown publicly.

More information about formatting options

What is 67 + 20?
To combat spam, please solve the math question above.