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MedPAC sees pros and cons to physician-owned specialty hospitals

Ambulatory Surgery Reimbursement Update, November 2, 2004

The preliminary results of an analysis study of physician-owned specialty hospitals conducted by the Medicare Payment Advisory Commission (MedPAC) are in, and it seems that, thus far, the commission has been able to make a case for and against the proliferation of such facilities.

According to a statement issued last week by the Association of American Physicians and Surgeons (AAPS), MedPAC representatives offered a presentation of their preliminary study findings at the AAPS's October 16 annual meeting in Portland, OR. At that time, the commission allegedly indicated that specialty hospitals could have a role in inspiring community hospitals to improve their levels of patient care and customer service, acting as "a wake-up call" for such institutions.

However, MedPAC-which is studying the issue as a requirement of the Medicare Modernization Act-isn't offering any ringing endorsement to the rise of these physician-owned specialties. In an article published by ModernPhysician.com, the commission is credited with offering the troubling assessment that these specialty hospitals are treating a more "favorable" selection of patients than community hospitals. By this, the study means that many high-paying services having to do with cardiac and orthopedic surgery are being snapped up by the specialty hospitals, leaving their public counterparts to toil away at the less-profitable ones.

MedPAC Commissioner Ralph Muller was quoted, in the ModernPhysician.com article, saying, "It destroys our payment system to have this going on." MedPAC figures to clarify its overall position when it releases a larger report on specialty hospitals in March 2005, just three months before a moratorium on new physician investment in specialty hospitals (provided for in the Medicare act) expires in June.

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