Study: Specialty Hospitals Offer Valuable Community Services

Newswise — Physician-owned orthopedic, surgery and cardiac specialty hospitals provide high-quality patient care and offer valuable services to their communities despite being more likely than community hospitals to self-refer patients, according to a new study.

The study by researchers at RTI International was funded by the Centers for Medicare and Medicaid Services and is published in the January/February issue of Health Affairs.

Researchers studied 2003 Medicare claims and Internal Revenue Service data, held patient focus groups and conducted site visits at hospitals in six markets to compare physician referral patterns, quality of patient care, patient satisfaction and community benefits of physician-owned specialty hospitals to those of community hospitals.

"We believe that physicians' commitment to and pride in their specialty hospitals are powerful positive forces that have been underappreciated," said Leslie Greenwald, Ph.D., RTI's lead author. "While our research shows that physician owners often refer patients to their own facilities, it also suggests that many physicians make those referrals for reasons not related to profits, such as insurance contracts, patients preferences, scheduling of procedures and the location of the hospital in relation to physician offices."

The study was launched in response to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 in which Congress established an 18-month moratorium on the development and expansion of new physician-owned hospitals. Policymakers issued the moratorium over concerns that specialty hospitals have an unfair competitive advantage over community hospitals, offer a lower level of care, contribute less to their surrounding communities and refer patients only to their own facilities.

However, results of the study showed that specialty hospitals generally provide quality care to satisfied patients. The study also found that although specialty hospitals provide less uncompensated care, they contribute substantial tax revenues to their communities.

"We found that community hospitals have responded vigorously to local competition, offering physicians alternative financial arrangements such as building physician offices on campus and providing valuable operating room time as an incentive for referrals," said Jerry Cromwell, Ph.D., RTI's study director. "Specialty hospitals actually stimulate a competitive environment that could have positive effects on the quality of care."

The researchers suggest that much of the favorable selection that exists in hospital facilities may relate to a Medicare payment system that overpays for less complex patient surgeries.

"Reviewing and modifying the Medicare payment methodology could be more effective at addressing physician incentives to self-refer than would policies limiting referrals to specialty hospitals," Cromwell said.

The abstract for the study can be viewed on the Health Affairs Web site.

About RTI International RTI International, the nation's second largest independent nonprofit research organization, is dedicated to conducting research and development that improves the human condition by turning knowledge into practice. RTI has more than 2,500 staff members who work in Research Triangle Park, North Carolina, eight regional offices in the United States, and five international offices. These dedicated professionals offer innovative research and technical services to governments and businesses worldwide in the areas of health and pharmaceuticals, education and training, surveys and statistics, advanced technology, governance, economic and social development, energy, and the environment. For more information, please visit us at http://www.rti.org.