Keeping the Brakes on Physician-owned Hospitals is Best for Patients

Rick Pollack, American Hospital Association CEO and President standing in front of United States flag and the AHA seal.

Fair competition has always been the driving principle of our nation’s economy. This includes health care, and it’s the reason the Ethics in Patient Referrals Act, more commonly known as the “Stark Law,” has been on the books for decades to protect the Medicare program from the inherent conflict of interest created when physicians self-refer their patients to facilities and services in which they have a financial stake.

But the Stark Law’s “whole hospital” exception permitted physicians to refer patients to those hospitals where they had an ownership interest in the entire facility rather than just in a subdivision, such as imaging or surgery. In 2010, Congress closed the “whole hospital” exception loophole, except for grandfathered hospitals.

Closing the loophole made good sense then, and it makes even better sense now.

We’re concerned that some members of Congress want to roll back this basic patient protection by eliminating Medicare’s prohibition on physician self-referral to new physician-owned hospitals (POHs) and all restrictions on their growth.

Backing up 15 years of research, a new report from Dobson | DaVanzo helps cement the powerful case for Congress to maintain current law, preserve the ban on physician self-referrals to new POHs and retain restrictions on the growth of existing POHs.

This new study found that POHs report on fewer Medicare quality measures and perform worse on readmission penalties than full-service community hospitals, demonstrating that POHs are fundamentally different from full-service community hospitals — they treat fewer patients, provide fewer services and do not meet as wide a range of patient clinical needs.

This report and others have shown the adverse impact POHs have had on:

Patient Selection — The Dobson | DaVanzo report reinforced earlier findings that POHs treat younger, less medically complex patients who are less likely to be enrolled in Medicare or Medicaid. Physician-owners’ practice of selecting the healthiest and wealthiest patients and avoiding less profitable Medicaid and uninsured patients creates a destabilizing environment that leaves sicker and less-affluent patients to community hospitals, threatening the health care safety net.

Access — POHs provide limited or no emergency services, relying instead on publicly funded 911 services when their patients need emergency care. In fact, a Department of Health and Human Services’ report found that a third of POHs “use 911 to obtain medical assistance to stabilize patients, a practice that may violate Medicare requirements.”

Cost — According to the Congressional Budget Office, physician self-referral leads to greater utilization of services and higher health care costs. Closing the “whole hospital” exception loophole to the Stark Law reduced the federal deficit by $500 million over 10 years, according to CBO.

But some members of Congress support ill-advised legislation (H.R. 977/S. 470) that would repeal current law — eliminating all restrictions on POHs, allowing unfettered growth of these arrangements, and raising the deficit at a time when our nation is trying to control increases in health care costs.

Preventing physician-owners from steering patients to facilities in which they have a financial stake is a sensible “first, do no harm” policy. This latest analysis once again reaffirms the need to maintain current law banning physician self-referrals to new POHs and restricting the growth of existing POHs.

Hawaii Wildfires

Americans everywhere have watched with shock, dismay and alarm as the deadliest wildfire in modern U.S. history devastated the beautiful island of Maui, exacting a terrible toll in lives lost and injured while causing vast damage to homes, businesses and property — including vital health care clinics and medical supplies. Once again, it was our front-line responders who first answered the cries for help.

Meanwhile, our hospitals, health systems and care teams are tending to the injured. And our health care workers continue to put the needs of their patients and communities first, even as many of them have lost so much.

The AHA stands with our colleagues at The Healthcare Association of Hawaii, which has shared a list of organizations that are supporting the victims. They are:

We join with all Americans in extending our support, hope and prayers to all those affected by this natural disaster as Hawaiians face the challenging road to recovery.

Physician Self-Referral Law/Stark law

Physician-owned Hospitals