HOSPITALS: The specialty hospital party looks like it’s over

Specialty hospitals have made quite a few docs a very tidy penny, (for instance see this debate from the medical hotspot of South Dakota) and there’s been plenty of propaganda from both sides of this debate. But my sense is that the party really is about to end here. Wednesday saw two signal events that confirm my thoughts.

First, an apparently definitive (not that these things are ever definitive in the world of spin that we live in) study from Jean Mitchell in Health Affairs seems to show that the big community hospitals were right all along. Specialty hospitals have been skimming off the healthier wealthier patients, charging Medicare and insurers the most they could and leaving the community hospitals holding the bag. The AHA and its lackeys in Congress have been all over this, hence the moratorium on specialty hospital construction and the soon-to-come reframing of how specialty hospitals get paid (and it won’t be more!).

Now even more confirmation of problems at the biggest kahuna in the specialty hospital pack as MedCath, which had some problems in the past but had seen its stock double over the past year or so, carelessly loses its CEO within 3 weeks of him taking over. Oh and earnings are down and going further down. Now I’m sure this all the fault of the hurricane and they’re not alone–have you seen Tenet’s stock price lately? But clearly things are not going well.

Of course, Medcath has data (represented by its lackeys independent consultants from Lewin) in the same Health Affairs that claims that Mitchell’s methodology is inaccurate, in that she mistakes who is really "owning" these specialty hospitals, and underplays the role of HMOs in shutting out these specialty hospitals from their networks. But they basically say that as doctors are "entrepreneurial" and then say that "we note that physicians’ demands for more clinical autonomy and control over their incomes will not go away if specialty hospitals are ‘banned.’ " In other words, give ’em any fee schedule, rules, organization, whatever, they’re going to find their way around it.

Of course the only way to really fix this is to put the incentives of the payer/insurer and the providers in the same place rather than opposing each other. If Kaiser Permanente had a specialty hospital, then you’d assume they’d figured out that it made financial and medical sense for their entire system. (And I don’t think they do have one). Obviously improved efficiencies are a good thing, but outside out of the pre-paid integrated sector, most of the health care system is engaged in a series of payment games based on figuring out how to stay ahead of the obscure payment code.

So the solution as ever (and I think Medicare is getting there very slowly) is to change the payment rules.  But even that won’t be perfect. But for now, I suspect that the specialty hospital will find itself forgtten in the same health care attic as the physician-owned home infusion center, soon to be joined by the multi-millionaire oncologist.

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