Physician Owned Hospitals /See Stark Act which threatens status


GREAT HISTORY FOR for profit page
Nonprofit to For-Profit Conversions by Hospitals and Health Plans:A Review  by Jack Needleman  Assistant Professor of Economics and Health Policy,
 Harvard School of Public Health

American Surgican Hospital Association Homepage

Profits and Losses in Healthcare by Emily Friedman from Health Progress May-June 1966

Volume growth (more people using more services) accounts for more than half (55.4 percent) of the increase in spending on hospital services from 1997 to 2001, according to the report, «ÄúCost of Caring: Key Drivers of Growth and Spending on Hospital Care.«Äù Factors accounting for volume growth include population growth and aging; the easing of managed care restrictions; and new technology that allows more care for more people.
Growth in the costs to hospitals in providing patient care accounts for the remaining 44.6 percent of the growth in hospital spending, according to the report. Most of the growth is attributable to labor costs due to the national hospital workforce shortage. Other notable cost drivers include rising expenses for drugs, medical devices, and liability insurance premiums. said AHA Executive Vice President Rick Pollack. «ÄúWe are faced  with a historic shortage of nurses and other caregivers, a crisis in professional liability insurance and record-breaking costs of pharmaceuticals at the same time we«Äôre balancing
the need for investment in new technology, emergency preparedness and patient safety initiatives.«Äù
The AHA is a not-for-profit association of health care provider organizations that are committed to health improvement
in their communities. The AHA is the national advocate for its members, which include nearly 5,000 hospitals, health care systems, networks and other providers of care. Founded in 1898, AHA provides education for health care leaders and is a source of information on health care issues and trends.
The Federation of American Hospitals («ÄúFAH«Äù) is the national representative of privately owned and managed community hospitals and health systems throughout the United States.  "RISING DEMAND, INCREASING COSTS OF CARING FUEL HOSPITAL SPENDING
WASHINGTON, DC (February 19, 2003)

"Until about 30 years ago Physician owned hospitals were fairly common. ...Typically, once they get these hospitals rolling, they cane can increase their income from 20% to 100%...because physicians are paid more for procedures performed at surgery".....Says one MD ' to gain control over how a hospital is run, you have to be an investor"  The Quality Indicator. Physician Resource. Jan 2003.

"Blue Cross Health Insurance began being offered through employers in the early 1930s. WW II
       helped fuel research in medicine that increased hospital demand and Kaiser advanced the first
       Health Maintenance Program shortly after the war ended. Up until 1966, hospitals remained
       primarily volunteer organizations. Then the Congress adopted Medicare and Medicaid for the
       elderly. Today, 55 percent of the payments to hospitals come from one of these two programs. With
       the money now available, the private sector became interested in opening hospitals and the growth
       of physician-owned hospitals and other for-profit hospitals continues today. Nationally 85 per cent of
       hospitals are not-for-profit, and in Orange County, 60 percent are not-for-profit/"

"Recently USA Today examined the trend of physicians who become "hospital entrepreneurs" by investing
                       in specialty centers that focus on services such as cardiac care and orthopedic surgery. Proponents of the
                       controversial centers say they offer patients hotel-like amenities, give doctors more control than do
                       traditional hospitals and create better medical care by focusing on specific diseases or conditions. By
                       working in facilities that they own, doctors can increase their earnings by seeing patients on a more efficient
                       schedule than that of traditional hospitals and by sharing the facility's profits.

                       But opponents of the hospitals say they take lucrative services from traditional hospitals, contribute to
                       rising medical costs by creating duplicative services, create conflicts of interest for physicians and widen the
                       health care gulf between rich and poor. Frank Nachtman, chief executive of Marshall Hospital, a traditional
                       facility in Placerville, Calif., said, "They'll skim off the cream, take the profitable patients and dump the
                       unprofitable ones on us. They want the healthy and wealthy patients." He added, "What about the sick and
                       the poor? This will cause the demise of the whole non-profit health care system."

                       The trend has sparked a debate in Congress over how to regulate doctors who refer patients to facilities
                       they own for treatment. House Ways and Means Committee Chair Rep. Bill Thomas (R-Calif.) has
                       requested the General Accounting Office, the investigative arm of Congress, to examine the impact of
                       specialty hospitals on health care costs, care for low-income patients and traditional hospitals. Although
                       federal law prevents physicians from earning kickbacks on such referrals, a loophole in the law permits
                       patient referrals to facilities in which a doctor has invested. Rep. Jerry Kleczka (D-Wis.) has introduced
                       legislation (HR 2490) that would close that loophole."
March 2002

                       Physician-Owned Hospitals Examined
The Healthcare Association of
                       Hawaii (HAH) is a non-profit
                       organization representing the
                       state's acute care hospitals and
                       two thirds of the long term care
                       beds with a total of 41 facilities.

"Hospitals Examine Competitive Alternatives To Physician Owned Facilities

                                by Scott Becker and Kristian Werling, published in Chicago Hospital News - March, 2003
                                Nationally and locally, over the past few years, there has been a proliferation of physician owned hospitals and surgery
                                centers. Currently, there are approximately 3,500 surgery centers throughout the country, the large majority of which have
                                some form of physician ownership. In addition to surgery centers, there are an increasing number of hospitals that are also
                                owned by physicians."

"A Competitor Comparison [From Integrated Medical Delivery, with several surgical hospitals in three southeastern states]

                              IMD's distinctive approach to health care facility development is significantly different from many other development
                              and management companies. IMD mandates physician ownership and control, and supports physician
                              self-governance. IMD works for the physicians on a fee-for-service basis. To illustrate our differences, please find our
                              Competitor Comparison below that details IMD's benefits.

                              Equity Ownership
                                                     No more than 5%
                                                                                         10-60% depending on corporate structure
                              Management Fee
                                                                                         5-7% of collected revenues
                              Patient Account
                                                     Provides all services at a percentage of
                                                     net collections or a flat fee
                                                                                         Facility has to provide all personnel and
                                                                                         systems to support patient account services
                              Facility Governance
                                                     Does not require voting member of
                                                     Executive Board
                                                                                         Executive Board my have non-physician
                                                                                         voting members
                              Management Agreement
                                                     30 day contract with declining early
                                                     termination fee - that reduces to zero after
                                                     24 months
                                                                                         Minimum 5 year contract with financial
                                                                                         penalties if terminated
                              Management Structure
                                                     Fee-for service customized to meet
                                                     Facility needs
                                                                                         Services defined by management
                                                                                         company, not by Facility
                              Technology Information
                              Systems "
Competitor Comparison