Pimping for Physician-Owned Hospitals


First published 2/16/11 on Gooz News

The Medicare Payment Advisory Commission couldn’t have been clearer in its 2009 report to Congress. “Although physician ownership of facilities may improve access and convenience for patients, evidence suggests that physician-owned hospitals are associated with a higher volume of services within a market.” A recent study from Georgetown University that looked at states like Oklahoma, Kansas, South Dakota and Arizona, where the number of such facilities has surged, found sharp jumps in back surgeries in Medicare patients after orthopedic surgeons opened their own hospitals compared to similar patient populations in the northeast, where such facilities are prohibited.

There’s not much argument about why this would be the case. If physicians own a facility and get a slice of the profits, they have a large incentive to refer as many patients as possible to fill its beds. This accounts for the rapid growth of specialty hospitals devoted to doing cardiology operations, orthopedic operations, cancer treatments and so on. The specialists own. The specialists refer.

Yet today, I watched Rep. Sam Johnson (R-TX) grill Health and Human Services Secretary Kathleen Sebelius at the House Ways and Means Committee about the need to “preserve choice” by allowing further expansion of these volume-driving institutions. Restrictions in the health care reform law are “going to cost 30,000 new, good-paying health care jobs in my state,” he said.

And you, gentle reader, thought that there was an angry mood on Capitol Hill to rein in out-of-control “entitlements” like Medicare.

Now, I’m sure you’re imagining that Sebelius, a former governor from Kansas, defended the bill. Johnson, over his 22-year career in Congress, has raised more money from health care professionals than from any other group, according to the Center for Responsive Politics.

She could have said: “Representative Johnson, we think it’s time we start getting health care costs under control and putting restrictions on physician-owned hospitals is the perfect place to start.”

Or she could have taken the hard line: “Self-referral that leads to over-utilization is bad health care compounded by a conflict of interest. This is no way to run a health care system.”

But that’s not what I heard. “We’re for preserving adequate choices,” she said. “I’d be happy to have that discussion with you.”

2 thoughts on “Pimping for Physician-Owned Hospitals

  1. Merrill
    Physician owned specialty hospitals are a perfect example of the pay for volume malaise that has driven the increase in cost of American medicine. Paying for these expensive procedures per unit with the people standing to gain making the decision that the procedure is necessary will continue to cost us all more money. A much greater sense of urgency regarding payment reform is needed. As we develop patient-centered, transparent accountable care organizations, we will need strong representation on the governing bodies from laymen and primary care to demand specialty services that are lower in cost, higher in quality and based on the best evidence.

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