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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  1. Call Bell – Citus Health’s Call Bell is the first mobile solution designed to save time and money while modernizing the home infusion industry. Through this mobile application, patients can directly communicate with clinicians and get answers instantaneously through their mobile devices. www.citushealth.com

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  2. Report: Doctors’ $275M Study Questioned
    The Associated Press
    Tuesday, August 29, 2006
    In 2005, CMS initiated a one-year demonstration project for cancer patients undergoing chemotherapy. The demonstration focused on measuring patient outcomes in three areas of concern often cited by patients undergoing infusional chemotherapy: controlling pain; minimizing nausea and vomiting; and reducing fatigue. Oncology Practices reporting data on all three factors qualified for an additional payment of $130 per encounter for chemotherapy administration (a financial incentive to use infusional drugs over oral drugs). That included a $26 patient copay.
    A Republican, Senate Finance Committee Chairman Chuck Grassley, found out from the Health and Human Services’ inspector general’s office that the value of the approximately $300 million-a-year demonstration project to report this information was for nothing. Providers were being paid $130 to simply forward the data that was already collected.
    CMS had decided to continue the demonstration project for 2006, with additional reporting to take a further step toward encouraging quality care and promoting so-called evidence-based best practices that have been proven to lead to improved patient outcomes. According to CMS, the payment for this oncology demonstration project is $23 per encounter. The new 2006 demonstration project’s objective is to have oncology payments increasingly focused on patient-centered care, rather than chemotherapy administration.
    While a Michigan/Harvard study (before Medicare reforms) documented a clear association between reimbursement to oncologists for the chemotherapy and the regimens which oncologists select for their cancer patients, a “Pattens of Care” study (after Medicare reforms) showed results that Medicare reforms are still not working. It is still an impossible conflict of interest. Once a decision to give chemotherapy is taken, oncologists receiving more-generous Medicare reimbursements used more-costly treatment regimens.
    According to findings in the American Medical Group Association’s 2005 Medical Group Compensation & Financial Survey, most specialties saw modest increases in compensation in 2004. The majority of specialties experienced increases at or just above the rate of inflation, and the primary care specialties saw increases of 6% – 8.8%.
    The survey found that during 2004 three specialties experienced the largest increases in compensation: general surgery (8.89%), pediatrics & adolescent (8.76%), and hematology & oncology ($8.52%). In addition to pediatrics and adolescent, other primary care specialties saw increases: family medicine (6.31%) and internal medicine (7.57%).

  3. About the physician-owned home infusion center becoming forgotten in the health care attic; if Congress continues the Medicare Chemotherapy Demonstration Project (an additional $130 per infusional-chemotherapy per recipient treatment) into 2006, it will still increase the temptations for oncologists to overuse injectable (infusional) drugs and promise to aggravate the economic problems Congress attempted to fix with the new law in the first place.
    The oncologists already have complete logistical, administrative, marketing and financial control of the process, and they also control the “knowledge” of the process. This amounts to total control. In economic terms, it would be in violation of the antitrust laws. The result is that the oncologist selects the product, selects the vendor, takes the markup (plus $130), conceals details of the transaction to the degree they wish, and delivers the product on his own terms including time, place and modality.

  4. Gadfly- you are correct– that is the way it has been in the past. But the healthcare world is changing, daily.
    Advice I give all my patients:
    1. ask questions and get answers
    2. understand, with the help of office schedulers and your insurance co– what your financial liability can be
    3. Don’t be afraid to walk away and get another opinion…

  5. //information on cost MUST be sought out by patients.//
    Why would the patient do any seeking if their costs have always been fully covered by their insurance? This is the cost in question for the patient – not the actual cost of the surgery. (The actual cost is of course important for health care policy and controlling the overall cost of insurance – I’m just saying a patient isn’t going to ask how much he/she might have to pay if he/she has always been fully covered in the past).

  6. Gadfly- (please check my response to your comment in Wal-Mart post…)
    I believe full disclosure of finacial interests is proper and ethical (and, I believe, the law). Once the financial disclosures are made, it should be a dual responsibility of patient/ physician office (and surgery center) to get the proper information about potential financial responsibility. The information on cost MUST be sought out by patients.
    Then, if it will cost you more than -you want, think it ought to, raises questions about the indications for the procedure- you can decide to go elsewhere, or talk with the doctor about doing the procedure at another location, if that is possible.

  7. I was directed to a private clinic (not sure if it qualifies as a hospital) when I needed knee surgery in grad school. It turned out it was only halfway covered by my insurance, and the doctor who referred me (he also ran the outside clinic) never warned me that my insurance wouldn’t cover it. When he scheduled the surgery, it just sounded like a routine thing: an expert told me I needed knee surgery and sent me to the place I needed to go. I had to pay over 1000 dollars, which was a big hit for a grad student.
    Because the clinic was small and out of the way, I don’t think I would just wander in there for treatment as a poor person: I would wander into a hospital because I know they have procedures, they have to treat me, and they might help me hook up with whatever funding I’m eligible for.

  8. Eric’s comment about many community hospitals having largely ignored making improvements to make more efficient the delivery of services for patients and doctors, has a lot of validity. In a recent visit to one of my parent’s orthopedic surgeon, he told me that the big elephant in town (community hospital) is too big to be efficient (safe and sanitary) in delivering services for patients and doctors. As a result, he is going together with other orthopedic surgeons to build their own surgical hospital to supply the needed efficiencies of proper medical care.

  9. Matthew-
    1. any data that says specialty hospitals or, for that matter, ambulatory surgery centers, when owned by physicians, see those physicians performing higher rates of surgery? Put another way, any data saying my doctor is more likely to operate on me if he has an ownership interest in the facility?
    2. consider shining the spotlight back on many community hospitals that have largely ignored making improvements to make more efficient the delivery of services for patients and doctors.
    3. are you, then, advocating the Prof Enthoven model of private IDS?

  10. What is it with specialty hospitals that makes it a big deal when removed from operations? Most of the time, issues pertaining to health is equated with the ability of hospitals to deliver. With these developments, the delivery of health care will definitely be affected. As metioned, something about financial matters have caused this pronouncement. For doctors, who specializes in a skill, this situation will be detremental to their income generation.

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