NCPA - National Center for Policy Analysis


June 24, 2005

Specialty hospitals, which are mostly physician-owned and for-profit facilities, focus on the care of specific conditions and represent a small but controversial segment of the health care industry, says the National Journal.

The 2003 Medicare Modernization Act imposed an 18-month moratorium on physician referrals to new specialty hospitals and directed the Centers for Medicare and Medicaid and the Medicare Payment Advisory Commission to assess the impact of specialty hospitals on community hospitals.

Some of their findings include:

  • In cardiac hospitals, the quality of care is as good or better than care in community hospitals, and patient satisfaction is very high.
  • Specialty hospitals did not have lower costs than community hospitals, despite keeping patients for shorter stays.
  • Only 4 percent of patients at physician-owned hospitals are on Medicaid, compared with 15 percent at community hospitals.

Community hospitals advocates argue that specialty hospitals pose an inherent conflict of interest because physician-owners have a financial stake in referring patients to their own facilities. Furthermore, critics charge, by focusing on one specialty, these hospitals draw profitable patients away from community hospitals, leaving the traditional hospitals without the funds to provide emergency care and other essential services that typically lose money.

Specialty hospital advocates counter that their larger cousins simply fear competition from more efficient, higher-quality operations. They boast that they provide better care for less money and that the competition they present to established community hospitals improves health care for all patients.

Source: Marilyn Werber Serafini and Lisa Caruso, "Health Care: Marcus Welby, CEO," National Journal, Number 23, June 4, 2005.


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