Kansas City-area specialty hospitals say health reform bill will stunt their growth
Kansas City Business Journal
Friday, March 26, 2010
The way CEO Don Burman sees it, Heartland Spine & Specialty Hospital provides superior care at an affordable price.
But the health care reform bill President Obama signed on March 23 could be hazardous to the health of the 48-bed Overland Park facility.
"Our worry is our ability to grow our business in the future,' Burman said.
Growth criteria in the bill include a requirement that the population in the hospital's home county must have increased by at least 150 percent of statewide growth in the most recent five-year period - a standard "virtually impossible" to meet, he said.
Physician-owned hospitals frequently are joint ventures with non-physician partners. The facilities are prevalent in states like Kansas that do not have a certificate-of-need process to approve new hospitals.
Of the roughly 260 physician-owned facilities nationwide, a dozen are in Kansas, according to trade group Physician Hospitals of America, based in Sioux Falls, S.D.
"Because we have built a better mousetrap and because we have challenged the conventional wisdom, we are being punished," Burman said of the industry.
The villain for the physician-owned hospital industry is the American Hospital Association, which Burman said has lobbied to protect the turf of the more-traditional, nonprofit community hospitals.
The new controls on physician-owned facilities also affect Leawood-based Nueterra Healthcare LLC, which develops and manages surgical facilities nationwide. Nueterra's facilities include physician ownership.
David Ayers, president of Nueterra's surgical facilities division, is on the PHA board of directors.
He said the new growth restrictions will present a challenge to Nueterra. One, in particular, would freeze at current levels the percentage of physician ownership in existing facilities.
Ayers said the company might have to find innovative ways to include physicians in the governance structure without making them owners.
"Nueterra's going to come out of this just fine," he said, "because we find ways to make our business work."
Although the language is unclear, according to the PHA, the new law also appears to say that physician-owned hospitals built after Aug. 1 may not be eligible for Medicare.
The weight of the new regulations seems aimed at strangling the industry, Ayers said.
"That is what they are trying to do - kill the industry," he said.
Physician ownership in hospitals can raise questions about conflicts of interest, said Marcia Nielsen, vice chancellor for public policy and planning at the University of Kansas Medical Center.
Such arrangements can create an incentive for physicians to refer the easiest cases and best payers to their facilities, she said.
On the flip side, Nielsen said, these facilities can provide great patient care because they generally develop expertise by focusing on limited procedures.
The Kansas Hospital Association is not opposed to physician-owned hospitals, spokeswoman Cindy Samuelson said.
The association's position, she said, is that they should be regulated to protect against conflicts of interest and require transparency in their ownership.
The association also argues that these facilities should be reimbursed at a different rate through Medicare to reflect the more limited patient population they serve.
NO-GROWTH POLICY
Industry trade group Physician Hospitals of America says the new health care reform bill includes four criteria that existing physician-owned hospitals would have to meet to expand:
- The hospital must be in a county where the population increase during the most recent five-year period is at least 150 percent of the state's population increase.
- The hospital's Medicaid inpatient admission percentage must be equal to or greater than the average for all hospitals in the county.
- The hospital must be in a state with an average bed capacity less than the national average.
- The hospital must have an average bed occupancy rate that is greater than the state average.
( go back to news and events )