Press Release

Full-Service Community Hospitals Blast Misleading Letter To Candidates from Limited-Service Hospital


A letter recently sent to presidential candidates about specialty hospitals is "all fiction, no facts," according to groups representing full-service community hospitals.  Those groups, the Iowa Hospital Association (IHA) and the American Hospital Association (AHA), sent their own letter to the candidates to set the record straight about the real impact of limited-service facilities, which drive up the nation's health care costs and threaten to dismantle vital community resources for patients.

The joint IHA-AHA letter responds in detail to a misleading missive that a group of physicians backed by the trade association Physician Hospitals of America, recently sent to presidential candidates.

Physician-owned, limited-service hospitals typically provide the most profitable services to patients who are less sick-essentially "cherry picking" the easiest, best-paying cases and serving few uninsured or Medicaid patients.  They have physician-owners who self-refer to the hospital, enabling physician-owners to pay themselves for referring patients to the facilities they own.  In contrast, full-service community hospitals provide a full array of services, from burn care and neonatal intensive care units to emergency departments - services communities depend upon in the middle of the night and in times of disaster.

Because limited-service hospitals are able to pick and choose patients, they divert well-paying patients to their facilities leaving the community hospital to care for more complicated and costly cases.  Faced with an un-level playing field, some community hospitals may have had to cut back on essential but expensive health care services communities depend on, thereby shredding the health care safety net.

Concerns have surfaced about limited-service hospitals' ability to handle emergencies and complications after surgery.  Recent deaths have occurred at limited-service hospitals due to physicians not being present "after hours."  Facilities were forced to call 9-1-1-and rely on the full-service community hospital-to provide the necessary treatment.

Congress has weighed in many times about the conflict of interest self-referral poses.  Current plans before Congress aim to restrain-not close-these facilities, which contribute to overuse of services and the increasing cost of health care.

Dear Presidential Candidates:

You recently received a misleading letter from a group of Iowa and South Dakota physicians that distorted the impact of physician-owned, limited-service hospitals on communities.  As representatives of nearly 5,000 full-service community hospitals and 117 hospitals in Iowa, we believe these limited-service facilities pose an inherent conflict of interest for physicians involved and drive up health costs for everyone. 

Physician-owned, limited-service hospitals (fewer than 200) typically offer the most profitable services to less acutely ill patients, and serve few uninsured or Medicaid patients.  They have physician-owners who self-refer to the hospital.  This enables physician-owners to pay themselves for referring patients to the facilities they own.  In contrast, full-service community hospitals have deep roots in the community and provide a wide range of services and care for all patients who come to our emergency department doors. 

The Dec. 6 letter from a group of physicians backed by the Physician Hospitals of America is full of misinformation and does a great disservice to the full-service community hospitals across the nation that care for patients 24 hours a day, seven days a week.  Limited-service hospitals, if left unchecked, can threaten a community's health care safety net, which community hospitals anchor.  IHA and AHA believe you deserve the facts on this important issue and have refuted myths being circulated by physician-owned, limited-service hospitals.

Myth #1:  "Current congressional proposals would shutter physician-owned, limited-service hospitals."

Fact:  Under current proposals being discussed, hospitals that had physician-ownership arrangements will be able to continue to have physicians self-refer and maintain their ownership interests, with certain disclosure requirements to patients.  

Myth #2:  "Physicians have little or no economic incentive to steer patients to one hospital over another."

Fact:  Physicians with an ownership stake in specialty hospitals have considerable economic self-interest in the volume of referrals they generate.  Physician-owners are paid their professional fee for the procedure, a share of the facility fee, and then again as the value of their investment increases as a direct result of the self-referral.

Myth #3:  "Physician-owned, limited-service hospitals are just like the Mayo Clinic and Cleveland Clinic."

Fact:  Physician-owned, limited-service hospitals are very different than the esteemed Mayo Clinic and Cleveland Clinic that are physician-run-not owned-non-profit, full service hospitals and do not embody the conflict of interest inherent in the "physician-owned" facilities.

Myth #4:  "Limited-service hospitals provide higher quality care than full-service hospitals.  Community hospitals aren't willing to share quality data."

Fact:  There's no significant difference in care outcomes between the two types of hospitals, according to a peer-reviewed study in the New England Journal of Medicine.  Researchers suggested that the limited service model does not yield better outcomes.  The AHA and IHA support public reporting of quality measures for hospitals allowing for "apples" to "apples" comparison and work within the Hospital Quality Alliance to encourage additional quality reporting.
However, concerns with limited service hospitals' ability to handle emergencies and complications after surgery have become all too real.  Recent deaths have occurred at limited-service hospitals due to physicians not being present "after hours."  Limited-service hospitals were forced to call 9-1-1-and the full-service community hospital-in order for the patient to receive appropriate, life-saving health care treatment.  The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues, has maintained that some transfers of patients raises concerns about the quality of care at limited-service hospitals.

Myth #5:  "Specialty hospitals are more efficient and provide health care at a lower cost than do full-service community hospitals."

Fact:  MedPAC actually found that specialty hospitals are less efficient than community hospitals and drive up utilization.  Additionally, the federal government's Congressional Budget Office recently determined that prohibiting self-referral will result in significant savings-$700 million over five years-to taxpayers and the Medicare program.  At a time when the cost of health care is spiraling out of control, limited service hospitals contribute to increasing health care costs for Americans.

Myth #6:  "Specialty hospitals serve a wide mix of patients, including those on Medicaid and the uninsured."

Fact: The independent, non-partisan Government Accountability Office (GAO) and MedPAC, on behalf of the federal government, separately found that specialty hospitals treat a much lower share of Medicaid patients than do community hospitals in the same area.  And limited-service hospital patients tend to be less sick than patients with the same diagnoses at general community hospitals.  

Myth #7:  "Full-service community hospitals are opposed to competition from specialty hospitals."

Fact:  Full-service community hospitals support free and fair competition, but the physician self-referral in which specialty hospitals engage provides an unfair advantage to physician-owned specialty hospitals by, in effect, enabling physician owners to pay themselves for referring patients to facilities they own.  Instead of promoting fair competition, specialty hospitals actually stifle it.

The Iowa Hospital Association and the American Hospital Association represent a full spectrum of hospitals-large and small, rural and urban-committed to providing a range of services to the patients they serve.  Full-service community hospitals exist to meet the health care needs of the communities they serve.  While the physician-owners at Physician Hospitals of America derogatorily call the other hospitals in their community "big box" hospitals, Iowans know hospitals are much more than bricks and mortar.  It's the people, resources and services inside the community hospital that matter.  Community hospitals stand ready with to provide all services, from burn care and neonatal intensive care units to emergency departments.  We're proud of what we do for our communities 365 days a year. 

Big or small, more community hospitals are facing the issue of physician self-referral, which poses a significant threat to their continued viability and ability to provide access to critical services for their patients.  We ask you to continue to support your full-service hospitals that patients and communities depend upon for a wide range of services.


Iowa Hospital Association

American Hospital Association

About the AHA

The AHA is a not-for-profit association of health care provider organizations and individuals that are committed to the health improvement of their communities. The AHA is the national advocate for its members, which include nearly 5,000 hospitals, health care systems, networks, other providers of care and 43,000 individual members. Founded in 1898, the AHA provides education for health care leaders and is a source of information on health care issues and trends. For more information, visit the AHA website at

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