IN THIS ISSUE:
? AHA Issues Critique of Specialty Hospitals
? MWE White Paper Summarizes FTC/DOJ Report
? Scruggs Interviewed in “HealthLeaders”
? American Goes to India for Heart Surgery
? Reaction on HBR Discussion List
AHA Issues Critique of Specialty Hospitals
I’ve been predicting for a while that the next health care segment to come under the gun will be the hospitals. I expect that 2005 will be intense for the hospital industry. Recent developments bear that out.
The American Hospital Association issued a “TrendWatch” paper critical of “limited service providers” i.e., ambulatory surgery centers, specialty hospitals and diagnostic testing facilities. The paper notes that the number of such facilities is “growing rapidly” especially in states with no Certificate of Need (CON) regulations. The core of the AHA critique is that these facilities take the most profitable services away from community hospitals, making it difficult for the traditional hospitals to maintain trauma centers and emergency departments. The paper further argues that when the specialty facilities are physician-owned, the Docs have a financial incentive to refer patients to their own facilities and to over-treat them once they are there.
That is the argument. Unfortunately the paper doesn’t address the broader issues, such as whether internal cross-subsidies are appropriate. Is it really fair or rational to have maternity and cardiac patients singled out to pay for the costs of a trauma center? If trauma centers are a valued community service, shouldn’t the whole community subsidize the costs? This question leads to the even more important issue of the lack of transparency in hospital pricing generally. If all hospital prices were set rationally and related to the cost of providing the service, the specialized facilities would no longer be able to cherry pick the over-priced services. Realistic prices might also discourage the inappropriate use of emergency departments.
It is also questionable that physicians are motivated by mere greed in referring their patients to facilities in which they have invested. Given the scandalous track record of hospitals in patient safety and quality, it is entirely possible that physicians invest in facilities in order to assure better quality, and naturally refer their patients to facilities in which they have some influence over the quality of the care provided.
MWE White Paper Summarizes FTC/DOJ Report
A debate over these issues is long overdue. Unfortunately, it is likely to be conducted in the adversarial climates of the courtroom and the press rather than the more collegial atmosphere of the policy community. The giant law firm of McDermott, Will & Emery has issued a White Paper summarizing the key points of the recent 361-page report issued jointly by the Federal Trade Commission and the Department of Justice, “Improving Health Care: A Dose of Competition.” At a mere 8 pages, this summary may be more accessible to the lay reader than the original report. It says that the anti-trust agencies will be vigorously pursuing anti-competitive behavior by provider networks, joint purchasing ventures, hospital mergers, insurance companies, and pharmaceutical companies. The report also addresses federal and state regulatory policies that are anticompetitive. The White Paper says, “The Report directs the federal and state governments to reexamine whether the use of health care subsidies and health benefits mandates may create inefficiencies or a potential to reduce competition, restrict consumer choice, raise the cost of health insurance, and increase the number of uninsured Americans.” Specifically, it “admonishes states” to reconsider CON, reject collective bargaining by physicians, broaden the membership of licensing boards, reduce barriers to telemedicine through reciprocity compacts, and promote PBM transparency.
Scruggs Interviewed in “HealthLeaders”
Along with growing pressure on the hospitals from the anti-trust agencies comes private class action litigation from Richard Scruggs and other affiliated attorneys. “HealthLeaders” magazine has run an interesting interview with Mr. Scruggs who is “leading the charge in 49 lawsuits accusing 370 nonprofit hospitals of overcharging the uninsured and using overly aggressive collection methods on poor patients.” Mr. Scruggs says, “A charity hospital charging charity patients more than they charge anyone else doesn’t sit right with folks. It’s hard to defend.” He doesn’t see legislation coming out of Washington to correct the problem, and he doesn’t expect much to come from the regulatory agencies. “There ain’t anybody on this watch, that I can tell.” Don’t let the folksy style fool you — this is a cagey advocate. He says, “I have developed at least a philosophy that national litigation against entrenched industries is a three-front war. You have to win in the courtroom, but there’s also the PR battle and the political battle. They’re all interrelated.”
American Goes to India for Heart Surgery
If American hospitals can’t do the job, there is a growing industry of off-shore facilities that will pick up the slack. An article in the “Times of India” relates the story of Howard Staab, an uninsured carpenter from North Carolina who needed heart surgery. Rather than trying to pay the quoted $200,000 the procedure would cost in the U.S., Mr. Staab flew to India and got it done for less than $20,000. The article says, “India is a relative newcomer to the healthcare tourism from the U.S. Americans have been trickling into specialized hospitals in Thailand and Singapore?” Seattle-based cardiologist Dr. Vinay Malhotra is quoted as saying, “For a blue collar worker earning just above minimum wages, what is the option? India will become the destination as more and more lay people know about this.” The article includes a link to Mr. Staab’s experience at www.howardsheart.com.
Reaction on HBR Discussion List
This “Times of India” article was posted on Galen’s Health Benefits Reform List and got some fascinating feedback. I won’t post the authors’ names because I haven’t asked for their permission, but they include a variety of physicians, brokers, attorneys, and economists from all over the U.S.
? “Simply amazing – the world continues to shrink at warp speed. This is how civilization moves ahead. The Luddites are hanging on for dear life. Actually, news such as this is why one must feel very good overall about the future of capitalism and freedom in the world today, IMHO.”
? “When consumers have purchasing power in their HSA, and are looking at large out of pocket expenses here in the USA, we will see more and more choosing foreign options. It is only just beginning. Many surgeons are going foreign to perform because it saves their patients a fortune and there is minimal liability.”
? “I don’t think the usual price collected is that much in the U.S. We should be the ones exporting superior health care to the rest of the world. Unfortunately government has intervened.”
? “The problem that comes to mind, when considering major surgery really far away, like India, is thromboembolism from a long flight back, if fairly recent surgery. Don’t know if that’s been looked at in the journals.”
? “Some doctors in this group have already located a hospital in the Dutch side of the Netherland Antilles that will allow them hospital privileges. When these foreign countries find out they can tap into the 1.5 trillion dollars spent on health care, they will become very accommodating.”
? “In the past, I had always associated Mexican clinics attracting Americans with some of the real quacks offering coffee colonics or whatever, to the truly desperate. Terminal cancer, that sort of thing. Maybe it’s time to reconsider.”
? “I agree, and having been to Mexico several times… I would be slow to jump – but, there seem to be more bonafide treatment centers popping up with credible people, some US docs going there on a rotating basis. Not just Mexico either – there are several countries that are doing this.”
? “Note, Friends, that many of the best surgeons and physicians doing their work in India and other countries now ready to lure Americans for health care got their training here in America. We are exporting our intellectual excellence but not getting paid for it.”
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