Specialty hospitals ban ending with a whimper

Today marks the end of an 18-month moratorium on the creation of physician-owned specialty hospitals, but the occasion probably will be observed quietly on Capitol Hill — a state of affairs that appears poised to persist for some months.

The hospital industry pushed hard for legislation that would have staved off the threat of what it calls “limited service” facilities, which focus on specific types of services such as cardiac surgery, and will carry on the fight as the year moves forward. Hospitals were backed by the U.S. Chamber of Commerce and the Business Roundtable.
Thomas Butler
Sen John Kyl (R-Ariz.).


But a counteroffensive by specialty-hospital advocates such as MedCath Corp. and the American Surgical Hospital Association has slowed efforts in Congress to move legislation to extend the moratorium established by the Medicare Modernization Act in 2003.

The contributions of the physician community cannot be underestimated. Although some groups representing doctors backed the hospital industry, the American Medical Association (AMA) lent its considerable clout to the specialty-hospital sector. The AMA has grown increasingly close to congressional Republicans during the ongoing battle for medical-liability reform.

“We haven’t carried [out] a big campaign or anything, but we certainly haven’t been quite about how we feel,” said AMA trustee William Plested. The American College of Surgeons and other organizations also weighed in.

A critical turning point occurred last month, when the Centers for Medicare and Medicaid Services (CMS) unveiled its plans to make significant changes to Medicare payments for hospitals, revisit the criteria it uses to determine what makes a facility a “hospital” and enact a de facto six-month extension of the moratorium.

Federation of American Hospitals President Chip Kahn said the extra time “provides a buffer for policy consideration.” If CMS moves ahead without Congress, “all of a sudden, we’d see people working together more cooperatively,” Plested said.

The AMA trustee added, however, that CMS would not be able to pursue its aims in that timeframe. “They’ve been screwing with us for years. … Another six months isn’t going to make any difference.”

The extra six months will provide each lobby with further time to press its case with undecided lawmakers.

House Ways and Means Committee Chairman Bill Thomas (R-Calif.) remains the wild card. The mercurial Thomas has yet to take a public stand on the specialty-hospitals issue, though some lobbyists for the sector expressed confidence he will come out on their side.

The House Energy and Commerce Committee shares jurisdiction on Medicare, which is Congress’s primary point of leverage over hospitals. Chairman Joe Barton (R-Texas) left no doubt about his views during a Health Subcommittee hearing last month. Barton described the moratorium as “un-American” and unequivocally stated, “I don’t think any further action by Congress is necessary.”

In the Senate, Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking member Max Baucus (D-Mont.) introduced a bill (S. 1002) that effectively would permanently prohibit new physician-owned specialty hospitals.

Grassley and Baucus shined a bright light on the issue at a hearing in March and introduced their bill almost a month ago, but the measure has only three other co-sponsors: Pat Roberts (R-Kan.), Ken Salazar (D-Colo.) and Blanche Lincoln (D-Ark.).

“I know there is additional interest,” a Finance Committee aide wrote in an e-mail. “I think we may be sending out a more formal dear colleague letter at the end of the month,” the aide wrote. A Grassley spokesperson said he is seeking to drum up support on the committee and predicted the end of the moratorium would renew attention to the issue. The bill likely will be considered in a mark-up, the spokesperson said.

The measure might face an uphill struggle on the Senate floor, however. Republican Policy Committee Chairman Jon Kyl (Ariz.) already issued an analysis last month that rejects the moratorium. Sen. Tom Coburn (R-Okla.), a physician, strongly supports specialty hospitals and has sounded off on his perch as chairman of a Governmental Affairs Committee panel.

“There’s still a risk of legislation,” stressed Jamie Harris, chief financial officer and executive vice president of Charlotte, N.C.-based MedCath. “It depends on who you talk to on the Hill,” Harris said. He added that a number of members have been converted to the firm’s point of view since 2003.

The hospitals believe legislation “would still be necessary” but the Grassley-Baucus bill is not the only means to achieve their ends, Kahn said.

Several lobbyists predicted that specialty-hospitals legislation would not advance until late in the year, possibly as part of a bill to make changes to Medicare payments to physicians and hospitals.

The administration and congressional GOP leaders have been reluctant to open Medicare to legislative efforts, but pressure from doctors on a scheduled payment cut will not ease. Using that vehicle to move specialty-hospital-related provisions could quiet both the doctors and hospital industry.

The AMA’s Plested predicted that the next battlefield will be at the state level as medical societies and other players seek to lift laws and regulations that are unfavorable to specialty hospitals. “Voters will demand it,” he said, when they see specialty hospitals opening in neighboring states.