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

Specialty hospitals are not a new phenomenon. Specialty hospitals have existed in various forms for many years (e.g. children’s hospitals, rehabilitation hospitals, eye and ear hospitals, arthritis hospitals etc.). The latest trend in specialty hospitals, however, includes those focusing on cardiovascular surgery, orthopaedics, surgery and women’s health. Across the country at present, there are approximately 100 new specialty hospitals with at least 26 additional facilities under development.¹

Specialty Hospitals vs. Community Hospitals

Specialty hospitals offer focused services to patients, in contrast to community hospitals that provide a broad range of services. Physician owners in specialty hospitals have greater control over the facility and the quality and efficiency of care (e.g., scheduling of surgeries, surgical equipment, staffing etc.). Furthermore, these facilities tend to have greater patient satisfaction, reduced costs, and improved infection rates.²

As specialty hospitals continue to rise in popularity, so does the controversy surrounding them. Physician-owned specialty hospitals are being accused of only caring for the healthiest and the most financially rewarding patients.³ Furthermore, community hospitals contend that physicians with ownership interests in specialty hospitals may be providing unnecessary services because of their financial interests in these facilities.⁴ Finally, many community hospitals claim that their lower revenues can be attributed, in part, to competition from specialty hospitals.

These claims by community hospitals cannot be substantiated:

• The 2004 membership survey conducted by the American Surgical Hospital Association (ASHA) reveals that surgical hospitals do provide a substantial amount of care to Medicare and Medicaid patients as well as uncompensated care. The survey indicated that 29% of revenues for specialty hospitals came from Medicare and 6.5% from Medicaid. Furthermore, the level of uncompensated care was reported as 5.3%.⁵
• There is currently no evidence to support the community hospitals’ claim that unnecessary surgical services are being provided to patients.
• Preliminary studies from the Medicare Payment Advisory Commission (MedPAC) on the financial and other effects of specialty hospitals on community hospitals noted little financial impact on community hospitals. The MedPAC data indicates that community hospitals remained profitable despite the competition from specialty hospitals.⁶

As a final note, the Federal Trade Commission (FTC) has stated that competition in health care results in increased quality.⁷ The MedPAC preliminary report also found that the competition from specialty hospitals prompted positive changes in community hospitals’ in-patient services, such as extending patient hours, improving scheduling, and upgrading equipment.⁸ Furthermore, both the FTC and the Department of Justice recommend that Certificates of Need (CON) laws be repealed as being anti-competitive.⁹

The American Association of Orthopaedic Surgeons (AAOS) supports the rights of all patients to receive high quality, efficient health care. Specialty hospitals provide high quality services in the communities in which they are established. Several ownership models exist and all are successful at adding quality care to the community. The AAOS supports the development of specialty hospitals and encourages physicians and non-physicians to invest in the continued quality improvement of health care in their community.

The AAOS believes that specialty hospitals treat patients in a safe, high quality and efficient setting. Physicians should always consider the best interests of the patient in making the determination as to the facility in which the care is provided. The provision of services to the patient should not be based on financial criteria. The selection of the best facility for the patient should be based on medical criteria and facility capabilities. Patients should be referred to a facility with appropriate equipment and staff to care for the medical needs of the patient.

The AAOS also believes that physicians should divulge to a patient all ownership interests in a specialty hospital. The physician should discuss all options regarding facilities in which the care could be provided. The patient should be fully informed of his/her choices and allowed to make the final determination as to where to receive care. The AAOS believes that physicians with ownership interests in specialty hospitals and ambulatory surgical centers should not over-utilize services for financial gain; however, there currently is not any data to support this concern.

In addition, the AAOS also believes that CON laws should be repealed to foster healthy competition among all health care facilities, including specialty hospitals. Such competition will result in improved patient access and quality of care.

References:

1. Specialty Hospitals: Geographic Location, Services Provided, and Financial Performance, GAO-04-167, United States General Accounting Office, October 2004.
2. 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.
3. Casalino et. Al.
4. 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. See http://www.medpac.gov/public_meetings/transcripts/091004_specialty_AW_transc.pdf
7. Improving Health Care: A Dose of Competition, A Report by the Federal Trade Commission and the Department of Justice, July 2004.
8. See http:///wwwmedpac.gov/public_meetings/transcripts/091004_specialty_AQ_transc.pdf
9. Improving Health Care: A Dose of Competition, A Report by the Federal Trade Commission and the Department of Justice, July 2004.

©December 2004 American Academy of Orthopaedic Surgeons

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

Position Statement 1167

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