'Niche' Providers - Blast Fax

Lookout Memorial Hospital, Spearfish, SD

Niche providers drain community health services
No matter what, no matter when, America's community hospitals are there, keeping the promise that the full spectrum of health care services will be there, 24/7, when needed. Americans expect it … and community hospitals deliver.  BUT, physician-owned boutique hospitals - “niche providers” - undermine the mission of community hospitals by providing only the most highly profitable services to the least severely ill patients.

The 40-bed Lookout Memorial Hospital (LMH) in Spearfish, SD, operates an extensive range of services for its population of 9,600, including important emergency services, home health and hospice care. LMH managed to stay healthy through most of the 1990s and as a result continued meeting important community needs. The hospital was thriving when it was named one of the Top100 Rural Hospitals in the country in 1996. But in 1998 a group of local physicians launched their own surgery center. As the physician-owners admitted patients to their facility, much-needed funds from patient services at LMH dropped 50%. The truly devastating blow came in 2000 when the surgery center was converted into a 'hospital' by adding four beds, just as LMH was upgrading its operating rooms and adding two new surgical suites. Now, income from patient services doesn't even cover the cost of providing the care ... and one of the new suites has never been used. If too many services are drained from LMH, the hospital may have to discontinue complex or intensive services -- forcing residents to travel nearly 50 miles to Rapid City for all but the simplest primary care needs.

For more contact CEO Larry Veitz (605) 644-4091.

The business model for niche providers is one in which owner- physicians refer patients to facilities in which the physicians have an ownership interest – heightening concern about conflict of interest in clinical decision-making.

  • Steering profitable cases or well-insured patients to niche providers diverts revenue from full-service community hospitals … revenue that is critical to
    keeping open money-losing services that communities need, like trauma centers, burn units and emergency departments. 
  • Hospitals lose money every day caring
    for people with complex health needs
    and little or no health insurance. Without
    revenue from profitable services to help
    offset this cost, how can hospitals continue
    caring for those who are truly in need? 
  • The Senate version of the Medicare Prescription Drug Benefit and Modernization Act of 2003 begins to address the problem by prohibiting physicians from referring patients to a specialty facility in which they have an ownership interest.

Senators and Representatives:  Help community hospitals keep the promise of care by protecting access to critical services.  Retain the Breaux-Nickles-Lincoln language on niche providers in the final Medicare Prescription Drug Benefit and Modernization Act of 2003.


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