NCPA - National Center for Policy Analysis

Specialty Hospitals

March 11, 2004

Specialty hospitals, which often have 20 or fewer beds and which specialize only in a few profitable kinds of operations, have become one of the fastest-growing segments of health care.

Unlike outpatient surgery or radiology imaging centers, these facilities are licensed as hospitals. They mostly aren't required to have emergency rooms. Their proliferation isn't sitting well with community hospitals, triggering debates over issues such as fair competition and conflict of interest:

  • Hospital executives say specialty facilities, which often sprout up in affluent areas, siphon off the most profitable pieces of the health care pie without regard to the social responsibilities of providing emergency and charity care.
  • Critics also fret that physicians refer patients to facilities in which they have an ownership stake; the resulting conflict of interest, they argue, undermines the objectivity needed to ensure proper care.

But operators of specialty hospitals say they infuse the industry with healthy competition.

  • With their focus on medical niches and the repetitive practice of certain procedures, specialty hospitals accumulate the expertise needed to enhance care and reduce mortality rates, they say.
  • Specialty hospitals also free physicians from the complex scheduling requirements at traditional facilities that can result in long delays for surgery and last-minute changes, executives say.

The government estimates there are 100 specialty hospitals nationwide, most concentrated in seven states. Texas has been one of the most attractive markets for investors because of its rapid population growth. Also, Texas is one of several states that don't require investors in a new hospital to prove it's needed and won't financially harm existing facilities.

Source: Roger Yu, "Healthy Competition?: Large hospitals explore remedies as specialty facilities undergo rapid growth," Dallas Morning News, February 26, 2004.


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