Specialty hospitals, one of the fastest growing trends in health care

Sep 22 2004

The number of for-profit specialty hospitals, a relatively new breed of hospitals, which focus their efforts on a small number of medical procedures has become one of the fastest growing trends in health care.

The number of these hospitals tripled between 1990 and March 2003. Furthermore, the number of ambulatory surgery centers (ASCs), which focus on certain outpatient procedures, doubled between 1991 and 2001.

These specialty providers often referred to as "focused factories" direct their efforts towards specific medical procedures. Because of their specialization, they claim that they can perform higher quality medical procedures at lower cost than general hospitals. Yet critics argue that these focused factories are stealing the most profitable procedures from large community hospitals.

Mired in controversy, the federal government has instituted an 18-month moratorium that, in effect, freezes the construction of specialty hospitals. The moratorium halts payments for physician services in cases where physicians have an ownership interest in new specialty hospitals. Complicating the issue is the fact that most of these specialty centers are at least partially owned by physicians who can financially benefit from referring or not referring patients to their own facilities.

"Some focused factories have demonstrated impressive clinical results," said David Shactman, project director for The Council on Health Care Economics and Policy based at the Schneider Institute for Health Policy. "Yet, general hospitals are contending that specialty facilities cater only to the most profitable patients, draining revenue away from community hospitals that need those patients to cross subsidize care for the poor and uninsured as well as other unprofitable services that specialty hospitals don't have to provide."

On September 10th The Council on Health Care Economics and Policy will meet at the Ronald Reagan International Trade Center, Washington, D.C. to discuss the moratorium and the future course of public policy. The agenda includes, among others, Regina Herzlinger, perhaps the nation's leading proponent of focused factories and market-driven health care; Congressman Fortney "Pete" Stark the author of the Stark physician self-referral laws; Charles "Chip Kahn" the president of the Federation of American Hospitals; John Rex-Waller the President of National Surgical Hospitals; Thomas Mallon, the president of Regent Surgical Health; and Mark Miller, the executive director of The Medical Payment Advisory Commission (MedPAC), which has been charged by congress to study and report on these issues prior to the end of the moratorium.

The Council on Health Care Economics and Policy, based at the Schneider Institute for Health Policy at the Heller Graduate School for Social Policy and Management, Brandeis University, is an independent, non-partisan body of experts in economics and health policy. It focuses on the economic impact of changes occurring in the U.S. health care system. Council members include nationally recognized health economists as well as leaders in business and the health care industry.