Doctors Get More Equity in Hospitals
About 200 hospitals owned by doctors sprouted in the U.S. during the nineties, a quarter of them in Texas. Their growth was frozen in 2003 when the federal government temporarily stopped funding them through an 18-month moratorium in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). New Medicare enrollments were then suspended until very recently. Now that Medicare is lifting these restrictions, Reuters reports on the likely rise of specialty facilities from acute care hospitals dedicated to certain conditions to ambulatory surgery centers (ASCs). The administration now requires hospitals to disclose investment information in order to prevent illegal physician self-referrals. Those failing to do so may face civil penalties of $10,000 per day. A Medicare survey of hospitals tended to show proportionate returns compared to physician investment, but 53 percent of respondents did not complete this portion of the survey. For more on the CMS’ outlook on this issue, see Mark McCellan’s testimony in front of the Senate Finance Committee back in May.
Physicians co-owning facilities argue that they are efficient, “focused factories” offering quick operations and state-of-the-art technology. As they specialize on well-reimbursed practices such as cardiac and orthopedic care, they tend to be structurally more profitable. Consumer demand also seems to be fueling their growth. Big traditional hospital chains complain that these specialty competitors damage their margins. But the main sticking point remains possible conflicts of interest and self-referral. Still, some hospital groups such as Triad are starting to offer equity to doctors to compete with companies operating a joint venture model like United Surgical Partners does.
August 24, 2006 Related topics: Legal & legislative, Finance