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Physician-owned hospitals take on the other hospitals

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The House Ways and Means health subcommittee gave physician-owned hospitals a chance to defend themselves today at a hearing on competition in the traditional Medicare program and the private Medicare plan markets.

For years, the Ethics in Patient Referrals Act limited physicians’ ability to refer patients to facilities they owned. Physicians could refer patients only when they owned the entire hospital, rather than just part of a hospital.

Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) included a provision in the law, PPACA Section 6001, that lets physicians refer patients to hospitals they owned only if the hospitals had Medicare provider numbers as of Dec. 31, 2010. A PPACA Section 6001 grandfathering provision restricts the growth of physician referrals to physician-owned hospitals created under the rules.

Congress is now considering H.R. 976, the Patient Access to Higher Quality Care Act bill. The bill could make it easier for physicians to refer patients to physician-owned hospitals.

Rich Umbdenstock, president of the American Hospital Association (AHA), a group that represents thousands of hospitals of all sizes, testified against loosening the current rules.

Physician-owned hospitals often provide less emergency care than a Medicare hospital is supposed to provide, and studies have shown that physician self-referral leads to more use of health care services and higher costs for Medicare, Umbdenstock testified, according to a written version of his testimony.

Physician-owned hospitals also hurt community-owned hospitals, by cherry picking the most profitable patients, Umbdenstock said.

Joe Minissale, president of Methodist McKinney Hospital, a 21-bed, physician-owned hospital established in February 2010, said easing the PPACA restrictions on facilities like Methodist McKinney could expand the supply of health care and increase the level of competition.

Methodist McKinney is owned by 22 physician investors. It accepts most commercial managed care plans, not just Medicare and Medicaid, and it has reduced its average emergency room wait time to 76 minutes, compared with more than two hours at competitors, Minissale said.

The physician owners set up the hospital because they wanted to create a higher quality, more efficient hospital, Minissale said.

Big, publicly traded companies are buying many of the other hospitals in the area, Minissale added.

See also: Insurers take on the hospitals

“Data has shown that physician employment by hospitals and hospital consolidation is one of the biggest drivers of cost increases,” Minissale said. “So, while we strive to reduce costs and provide care in the most cost-effective manner, we’re being punished because of our physician owners.”

Medicare does not actually require Medicare hospitals to have emergency rooms, and physician-owned hospitals are not any more likely to cherry pick the most profitable patients than any other hospital, Minissale said.

Hospital boards of all kinds often make decisions about which services to offer where based on financial sustainability, Minissale said.

See also: FTC sees health mergers as threat