Position Statement

Specialty Hospitals

This Position Statement was developed as an educational tool based on the opinion of the authors. It is not a product of a systematic review. Readers are encouraged to consider the information presented and reach their own conclusions.

Introduction

As the delivery of health care continues to change in the United States, academicians and thought leaders have struggled over how health care providers can reduce costs while maintaining quality. Clayton M. Christensen, a noted Harvard scholar on disruption in industry, has written The Innovator's Prescription,¹ which details what the industry can do to reduce costs and maintain quality in healthcare. He states that the hospital industry is the only industry worldwide where the factory (a hospital) is not specialized and tries to provide and be everything to everyone. He states that a specialty hospital model could reduce costs for hospitalizations by 15-20% and is the disruptive innovation that will provide the best care at the lowest cost.

A typical community hospital provides a broad range of services to accommodate the needs of the public it serves. Specialty hospitals offer focused services to treat medical conditions that require a particular subset of skills and technology. Specialty hospitals are not a new phenomenon. They have existed in various forms for many years as children’s hospitals, psychiatric hospitals, rehabilitation hospitals, eye and ear hospitals, arthritis hospitals, and others. More recently, specialty hospitals have begun focusing on cardiovascular surgery, orthopaedic surgery, general surgery and women’s health. Some of these hospitals have been conceived and financed by physicians whose knowledge of their particular specialty provides valuable guidance to enhance the patient experience and improve outcomes. Physician expertise helps facilitate efficiencies in the delivery of care that translates into measurable cost savings. In 2008, there were approximately 175 physician-owned specialty hospitals across the country, representing four percent of all hospitals.²

The American Association of Orthopaedic Surgeons (AAOS) supports the rights of all patients to receive safe, high quality, and efficient care in the facility that best addresses the patient’s needs. The AAOS also supports the development of innovative health care facilities, including focused, limited service specialty hospitals that provide specific services that are cost effective for the communities in which they are established. Several ownership models exist, and the AAOS supports physician and nonphysician investment in facilities that deliver high quality and cost effective health care.

Specialty Hospitals versus Community Hospitals

Specialty hospitals, because of their concentration of activity in a single field, can often provide their physicians the necessary resources to remain at the cutting edge of healthcare. Greater volume also portends better outcomes, so better care may be delivered at a lower price. Physicians who work at specialty hospitals often have fewer conflicts with other departments over budget outlays and have greater input in the operation of the facility. Physician owners have the added advantage of direct participation in the governance of their facility and can quickly make decisions that allow them to more easily influence quality and efficiency. Economically, their objective differs from the more traditional model of delivering medical care at any cost, to one where, to remain competitive, there is an incentive to deliver high quality care in the most cost effective manner possible. Studies show that many of these facilities achieve greater patient satisfaction, reduce costs, and improve infection rates.³

Specialty hospitals continue to rise in popularity, but not without controversy, as traditional models of healthcare delivery are challenged. Claims of favorable patient selection, provision of extra services for profit⁴ and unfair competition with community hospitals have largely been refuted.⁵ The Federal Trade Commission (FTC) has stated that competition in health care results in increased quality. Preliminary studies from the Medicare Payment Advisory Commission (MedPAC) on the financial and other effects of specialty hospitals on local community hospitals note little financial impact. MedPAC data also indicates that community hospitals remain profitable despite the competition from specialty hospitals. The MedPAC preliminary report found that the competition from specialty hospitals prompts positive changes in community hospitals’ in-patient services, such as extending patient hours, improving scheduling, and upgrading equipment.⁶ In the recently enacted Patient Protection and Affordable Care Act (PPACA), Congress limits the growth of specialty hospitals by prohibiting new specialty hospitals from utilizing the physician self-referral hospital exception. However, Congress acknowledges the usefulness of specialty hospitals within the market place by allowing existing specialty hospitals that were in existence prior to February 2010 to be “grandfathered” and only placing limits on the expansion of the facilities’ capacity.

Specialty hospitals have an important role for treating patients who need musculoskeletal care. These facilities are a good complement to other facilities (acute care hospitals, academic medical centers, ambulatory surgery centers, etc.) that serve many of our patients. Further, specialty hospitals are well positioned to meet the Centers for Medicare and Medicaid Services (CMS) definition of a Center of Excellence (COE) as an important high quality and cost effective site for patient care.

The AAOS believes that the provision of services to the patient should not be based on provider financial incentives and that physicians should always prioritize the needs of patients when determining at which facility care is provided. The AAOS recommends that physicians should divulge to a patient any ownership interest in health care facilities, including specialty hospitals. The patient should be fully informed of his/her choices and be allowed to make the final determination as to where to receive care. The AAOS maintains that physicians with ownership interests in health care facilities should continue to adhere to the highest standards of quality and appropriateness of care without overutilization for financial gain.

References:

1. “The Innovator’s Prescription: A Disruptive Solution for Health Care.” Christensen, Clayton, Grossman, Jerome, MD, Hwang, Jason, MD. McGraw Hill, New York, NY; 2008.
2. MedPAC Report to Congress, March 2009
3. Casalino, Lawrence; Devers, Kelly; Brewster, Linda, Focused Factories? Physician Owned Specialty Facilities, Health Affairs (Nov/Dec 2004) 56-67: The Case for Specialty Hospitals, ASHA Legislative Position Paper, May 2003, American Surgical Hospital Association.
4. Specialty Hospitals: Information on National Market Share, Physician Ownership, and Patients Served, GAO-03-683R, United States General Accounting Office, April 2003.American Surgical Hospital Association 2004 Specialty Hospitals: Information on National Market Share, Physician Ownership, and Patients Served, GAO-03-683R, United States General Accounting Office, April 2003.
5. American Surgical Hospital Association 2004 Membership Survey Results to be distributed at the ASHA annual meeting in San Antonio, Texas.
6. Improving Health Care: A Dose of Competition, A Report by the Federal Trade Commission and the Department of Justice, July 2004.

December 2010 American Association of Orthopaedic Surgeons.

This material may not be modified without the express written permission of the American Association of Orthopaedic Surgeons.

Position Statement 1167

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