PHYSICIAN-OWNED SPECIALTY HOSPITALS TUESDAY, MARCH 8, 2005 U.S. HOUSE OF REPRESENTATIVES, The Subcommittee met, pursuant to notice, at 4:07 p.m., in Room B-318, Rayburn House Office Building, Hon. Nancy L. Johnson, (Chairman of the Subcommittee) presiding. [The advisory announcing the hearing follows:] (1) Johnson Announces Hearing on Physician-Owned Specialty Hospitals Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on Health of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on physician-owned specialty hospitals, following the release of the 2005 report of the Medicare Payment Advisory Commission (MedPAC). The hearing will take place on Tuesday, March 8, 2005, in B-318 Rayburn House Office Building, beginning at 4:00 p.m. In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. Witnesses will include Glenn Hackbarth, Chairman of MedPAC, and representatives from groups affected by Medicare's payment policies. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. BACKGROUND: In recent years, there has been increasing growth of specialty hospitals owned, in part, by physicians. Such facilities focus primarily on the performance of cardiac, surgical and orthopedic procedures. Proponents contend that these facilities provide a range of benefits, including increased efficiency, competition, better medical outcomes, and improved patient satisfaction. Critics of specialty hospitals contend that physician owners at these facilities select more profitable patients and procedures, which adversely impacts the resources of community hospitals. Critics also believe physician ownership creates conflicts of interest and may increase utilization and spending of services. Medicare payments for inpatient procedures at hospitals are determined by grouping medical procedures into more than 500 diagnosis-related groups (DRGs), with the goal of providing appropriate payments based on the type of medical condition and resources required to treat the condition. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (P.L. 108-173) responded to questions surrounding the growth of these facilities by imposing a moratorium until June 8, 2005, that prohibits the opening of new facilities in which a physician maintains an ownership interest. The MMA permitted existing specialty hospitals to operate. Also, the MMA requires MedPAC to issue a report by March 8, 2005, on cost differences, the financial impact of specialty hospitals on community hospitals, patient selection, and recommendations to update the DRG structure. In addition, the MMA requires the Secretary of the U.S. Department of Health and Human Services to issue a report by March 8, 2005, on in part, quality and differences in uncompensated care between specialty and community hospitals. FOCUS OF THE HEARING: The hearing will focus on physician-owned specialty hospitals, identification of potential problems and an examination of potential solutions. The MedPAC will present findings from its report to Congress on physician-owned specialty hospitals. The second panel will provide input from affected parties, including testimony from witnesses with experience in specialty hospitals, community hospitals and physician-referral issues. DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select 109th Congress from the menu entitled, "Hearing Archives" (http://waysandmeans.house.gov/Hearings.asp?congress=17.) Select the hearing for which you would like to submit, and click on the link entitled, "Click here to provide a submission for the record." Once you have followed the online instructions, completing all informational forms and clicking "submit" on the final page, an email will be sent to the address which you supply confirming your interest in providing a submission for the record. You MUST REPLY to the email and ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by close of business Tuesday, March 22, 2005. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225–1721. FORMATTING REQUIREMENTS: The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below.Any submission or upplementary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee. 1. All submissions and supplementary materials must be provided in Word or WordPerfect format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record. 2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee. 3. All submissions must include a list of all clients, persons, and/or organizations on whose behalf the witness appears. A supplemental sheet must accompany each submission listing the name, company, address, telephone and fax numbers of each witness. Note: All Committee advisories and news releases are available on the World Wide Web at http://waysandmeans.house.gov. The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202–225–1721 or 202–226– 3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special acc commodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. Chairman JOHNSON. Welcome everyone. We gather today to discuss the serious issue of physician-owned specialty hospitals. We will begin to explore today the results of the Medicare Payment Advisory Commission's (MedPAC), the report to Congress on physician-owned specialty hospitals. We will also hear from a representative of the Centers for Medicaid and Medicare Services regarding their preliminary results and the perspectives of various interested parties. In recent years there has been increasing growth in the specialty hospital area. Such facilities focus on the performance or cardiac, surgical and orthopedic procedures. Proponents contend that these facilities provide a wide range of benefits, including increased efficiency, competition, better medical outcomes, improved patient and provider satisfaction. Critics of specialty hospitals contend that physician owners at these facilities select more profitable patients and procedures which adversely impacts the resources of community hospitals. Critics also believe physician ownership creates a conflict of interest and may increase utilization and spending on services. These issues are important, and given the nature of the facilities and treatments at issue, compel us to consider the manner in which Medicare pays for inpatient procedures at hospitals and whether changes to the payment system are needed to provide accuracy and prevent waste. The Medicare Prescription Drug Improvement and Modernization Act of 2003 imposed a moratorium until June 8th, 2005 that prohibits the opening of new specialty hospitals while allowing existing specialty hospitals to operate, and allowing those under development to apply for a waiver. The moratorium expires and is something we must consider soon. We appreciate the efforts of MedPAC in issuing its timely report on physician-owned hospitals. MedPAC makes a variety of findings and recommendations which we will explore today. On our first panel we are happy to have MedPAC's Chairman, Mr. Glenn Hackbarth, here today with us to discuss the findings set forth in MedPAC's report. In addition, although we have been advised that the Secretary's report on specialty hospitals is not yet available, we are pleased to hear comments from Mr. Thomas Gustafson, who is the Deputy Director of the Center for Medicare Management and for the Centers of Medicaid and Medicare Services, who will provide limited testimony on their preliminary research data. His testimony will not and is not intended to provide any conclusions about the data, and is not to be considered a substitute for the Secretary's report, which we anticipate to be issued in the near future. On our second panel we are pleased to hear from representatives from the physician hospital and specialty hospital communities. They will provide varied perspectives on physician-owned specialty hospitals, the Medicare payment structure and potential improvements to the system for the benefit of Medicare beneficiaries, providers and taxpayers. Mr. Stark, I now welcome you. Mr. STARK. Thank you, Madam Chair. You are quite right, it is an important topic. My concern is that the growth of specialty hospital phenomena or whatever you choose to call it, could impact the structure of our medical care delivery system. In essence these facilities are pulling profit centers out of community hospitals and over time could cause a real disruption in the financing and the fiscal health, financial health of these hospitals. There aren't many of these specialty hospitals now, but if financial incentives are motivating a lot of for-profit corporations and physicians to team up and create heart hospitals, orthopedic hospitals, surgery hospitals, and the moratorium we passed has stalled this, but I do not think we have much time to act. The industry publications indicate there could be 100 institutions waiting in the wings to jump if in fact the moratorium expires, and I expect we would have trouble putting that genie back in the bottle once it opened. The specialty hospitals generate huge returns for their investors, mostly doctors, the other half by the people who have organized them. The question is, I do not know if there is any information that they are any better for patients. The food I understand is better, but that is hardly the issue. And are they good for the medical care delivery system as a whole? That I think is the real question. We enacted the Physician Self-Referral Laws because of overwhelming evidence that health care providers who personally profit from referrals will increase the number of such referrals, not surprising I don't suppose to any of us. When those laws were enacted physician-owned specialty hospitals basically did not exist. We included the whole hospital exception in the law because of the broad based entities in which it would be hard to prove that ownership caused inappropriate referral patterns, but we explicitly prohibited ownership in a subdivision of that hospital, as we say, a hospital within a hospital, and because it would cause just such a conflict. I submit to you that today's physician-owned specialty hospitals are nothing more than freestanding subdivisions of a hospital. I would like to go on record in support of the petition by the Federation of American Hospitals urging Health and Human Services to update their regulations to make clear that these physicianowned specialty hospitals do not meet the whole hospital exception. Today we will hear from MedPAC about their recommendations. I believe their proposal to readjust the payment system to eliminate the obvious financial incentives that encourage these specialty hospitals make good sense. But I still believe that realigning the payment system won't be enough to solve the inherent problem of selfinterest, and it is a positive change and one we should proceed with. MedPAC has also recommended and extension of the moratorium. At a minimum it is vital that we extend this moratorium until we have a legislative solution to the very real problems posed by the physician-owned specialty hospitals. Finally, I would like to note that we have a wide breadth of groups in agreement that something should be done to curb the growth of these physicianowned specialty hospitals. I would like to point to page 145 of the President's Budget, where it states, quote, "The Administration will seek to refine the inpatient hospital payment system and related provisions of regulations to ensure a more level playingfield between specialty and non-specialty hospitals." On the day when Pete Stark, Chip Kahn and President Bush all agree that something needs to be done, I think we can create a policy that Congress can pass, and I look forward to hearing from the witnesses today. Thank you, Madam Chair. Chairman JOHNSON. Thank you, Pete. Mr. Hackbarth? STATEMENT OF GLENN M. HACKBARTH, J.D., CHAIRMAN, MEDICARE PAYMENT ADVISORY COMMISSION Mr. HACKBARTH. Chairman Johnson, Mr. Stark, other members of the Subcommittee, it is good to see you again and I appreciate the opportunity. Chairman Johnson well summarized the basic issues here, the view of the proponents of physician-owned specialty hospitals as well as the opponents. |