Consumers Lose Round in Battle over Specialty Hospitals

Government monopolies must be defended! No matter how inefficient and costly they are

On March 8, the Medicare Payment Advisory Commission (MedPAC)--ignoring its own research and new studies showing the benefits of competition and specialization--recommended to Congress that it extend the moratorium on development of new specialty hospitals until January 2007. The moratorium, passed in late 2003, will end in June of this year if Congress takes no action. Passed as part of the Medicare Modernization Act of 2003, the moratorium law also asked MedPAC to study the pros and cons of specialty hospitals and report back to Congress with its findings and recommendations.

Congress included the moratorium in the Medicare reform measure amid concerns that specialty hospitals threatened the ability of community hospitals to provide essential services to patients and that physician ownership of specialty hospitals created incentives for doctors to recommend unneeded care. The MedPAC study largely refuted those concerns.

Members of Congress and policy experts were quick to weigh in on MedPAC's report and recommendations. Dr. Alan Pierrot, an orthopedic surgeon and past president of the American Surgical Hospital Association, told the Senate Finance Committee on March 8, "No proof of harm to general hospitals, risk to patients, or abuse of the Medicare program because of excessive or unnecessary surgery has been found. There is no justification to continue the moratorium beyond the legislated expiration date."

Pierrot's views were not shared, however, by Senator Max Baucus (D-MT). "When it comes to physician ownership of specialty hospitals, I'm not sure the playing field is level," he said.

The MedPAC study compared profit margins at community hospitals in markets that have specialty hospitals with the profit margins of such hospitals in markets that don't. In both markets, profit margins declined modestly between 1997 and 2002, but the decline in profits was greater for community hospitals that did not face competition from specialty hospitals. The study also found little that would suggest physicians with ownership stakes in specialty hospitals were performing unnecessary treatment. The research showed there were slight differences in utilization of heart procedures between markets with specialty heart hospitals compared to those without them, but most of the differences were not statistically significant.

MedPAC researchers also visited several specialty hospitals. The report notes that in their discussions with physician-owners, "the primary issue ... was greater control of hospital operations." Frustration with the bureaucracy at general hospitals was given as a key reason many physicians established specialty hospitals.

Addressing the criticism from physicians that they had unsuccessfully tried to enact changes at community hospitals, some administrators admitted they had been "slow to react to their physicians' demands for changes," according to the report.

Physician-owners at specialty hospitals also described to MedPAC how greater control over their facilities results in improved productivity. Among the factors they cited were fewer disruptions to schedules, less down time between surgeries, and better control of operating room staff.


More -- much more -- here

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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