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The Medicare bill that President Bush signed
into law last week gave a substantial victory to the nation's community
hospitals by stunting a new breed of competition: small hospitals, owned
partly by doctors, that specialize exclusively in surgery, heart treatment
or other profitable medical niches. The new restrictions on such specialty
hospitals were largely overshadowed during
the intense Medicare debate by the drive to add drug benefits to the
program and create a larger role for private health plans. Yet the effort
to limit the growth of those facilities is one of the first parts of the
law to go into effect and was the result of an intense lobbying campaign
by the hospital industry and an unlikely battle between two powerful
lawmakers who are longtime friends from the same state. The change, a single paragraph in the
678-page law, is simple on the surface. It will slow the development of
what critics call "boutique" hospitals by forbidding physicians
to make new investments in them for the next 18 months, while federal
officials study their impact. But the controversy that produced that
change stems from broad considerations about the place of market
competition in health care, doctors' ethics and the health care system's
ability to absorb patients who cannot afford to pay for care. The dispute centers on about 100 small,
specialized hospitals across the country, most of them less than a decade
old. In contrast with full-fledged hospitals that assemble many kinds of
treatment under one roof, these newer facilities focus on a single branch
of medicine -- mainly surgery, cardiac services, orthopedics or specialty
care for women. Nearly three-fourths of these for-profit
facilities rely on physicians as investors, according to the General
Accounting Office. And they attract a small but increasing fraction of
Medicare spending -- nearly $900 million in 2001. Proponents say specialty hospitals have
devised an innovative formula that provides high-quality care at lower
cost. "We have become very efficient, very astute," said Michael
Lipomi, president of the American Surgical Hospital Association, founded
three years ago. But critics say the facilities are a drain
on traditional hospitals, siphoning off relatively healthy patients who
require types of care for which Medicare payments are most generous -- and
often functioning without an emergency room, a crucial but typically
money-losing part of ordinary hospitals. And detractors say the
arrangement gives doctors a profit motive to provide unnecessary care. Regardless of which side is correct, the
proliferation of specialty hospitals spawned an aggressive, well-funded
lobbying campaign by the rest of the hospital industry. Charles N. Kahn
III, president of the Federation of American Hospitals, said the group,
which represents for-profit institutions, had been trying to blunt the
growth of specialty hospitals for several years when the momentum behind
the Medicare bill created "a legislative opportunity to deal with
it." The American Hospital Association (AHA) told
lawmakers that reining in specialty hospitals was one of its top
priorities for the Medicare legislation, according to Rick Pollack,
executive vice president. The AHA warned that its endorsement of the bill
hinged on the issue. To press its point, "we applied all the
tools," Pollack said. In late September, the AHA flew 100 hospital
leaders to "It's a David and Goliath story. . . .
And little David got creamed," said Dennis Kelly of MedCath Corp.,
which runs a chain of heart hospitals. Kelly said the larger,
better-funded lobby of community hospitals "hides behind their
community mission" in an effort to "stifle competition." Kelly said MedCath's 11 hospitals do not
match the image their detractors paint. He said they have emergency rooms,
treat complex cases and accept as many uninsured and other low-income
patients as full-fledged hospitals nearby. MedCath had its own well-placed lobbyists,
including former senator Birch Bayh (D-Ind.) and Robert Wood, the former
chief of staff to Health and Human Services Secretary Tommy G. Thompson.
Still, Kelly said, the company could not match the larger hospitals'
"political clout." In particular, the rest of the industry
agued that doctors' investments in specialty hospitals represented a
loophole in a 2000 law that prohibits physicians from referring patients
to clinical labs, diagnostic centers and other medical facilities in which
they have a direct financial stake. That law makes an exception for
investments in "whole hospitals." Hospital industry lobbyists
argued that Congress had not envisioned that the exemption would apply to
small hospitals with narrow niches of care. Pollack said the AHA used a lobbying
strategy of trying to "plant some seeds in the right places,"
focusing on a few lawmakers who were especially influential in the
Medicare debate. AHA members found an ally in Sen. John Breaux (D-La.), a
longtime champion of broad changes to the program. But Breaux encountered resistance from a
fellow Louisianian, House Energy and Commerce Committee Chairman W.J.
"Billy" Tauzin (R), who wanted to order a federal study of
specialty hospitals while allowing doctors to continue investing. "It's not our job to pick winners and
losers in the marketplace," said Tauzin's spokesman, Ken Johnson.
"If these hospitals can provide a community service and save money,
what's the argument?" Tauzin and Breaux worked out the 18-month
moratorium as a compromise. "Despite the unpleasant outcome, it could have been much worse," said Lipomi of the surgical hospital group. "We were fighting one of the biggest lobbying organizations in this country." Copyright
© 2002 Global Action on Aging |
