Physicians at McBride Orthopedic Hospital had ambitious plans for their Oklahoma City hospital before Obamacare. Two new operating rooms and a four-bed intensive-care unit were part of a multimillion-dollar expansion project that promised to bring competition and more health care choices to the community.
But once President Obama’s signature was dry on the 2,409-page Patient Protection and Affordable Care Act, so, too, was the McBride project. The recently enacted law imposed a series of new federal regulations on physician-owned hospitals, including an immediate ban on expansion.
“We pulled the plug when the law was signed,” McBride Chief Executive MarkGalliart said. “We were ready to break ground. We had everything approved by the state. We had the construction agreement in place. We were going to meet our timeline until the legislation passed.”
Within days of enactment of the new law, developers across the country nixed plans for 24 new physician-owned hospitals under construction. It will be a struggle for an additional 47 new such hospitals under construction to meet an Obamacare-imposed deadline of Dec. 31 to be finished and have their Medicare certification.
Galliart is now preparing McBride for other onerous requirements imposed by Obamacare on the nation’s 260 physician-owned hospitals. In addition to limits on expansion and new construction, the law restricts new investments, requires new annual reports to the government and sets fines for hospitals that fail to abide by transparency rules.
Imagine if the government owned General Motors and the Congress passed a bill that barred Ford from producing “any new cars and couldn’t expand on its existing cars,” Galliart said. “What other industry would put up with this? If we were spending money recklessly and harming people, that’s one thing. But physician-owned hospitals are doing it better and more efficiently.”
Officials with physician-owned hospitals worry the new regulations of Obamacare could bring about their demise. But what’s in that bill that is so problematic?
Section 6001 spells out the restrictions placed on physician-owned hospitals, covering everything from expansion restrictions to financial audits. Only the 260 hospitals owned by doctors are covered, not the other 5,800 hospitals in America.
Physician owners view the rules as an anti-competitive move meant to hurt their bottom line, fueled by community hospitals and powerful Washington lobbyists at the American Hospital Association.
At McBride Orthopedic Hospital in Oklahoma City, the new law meant curtailing construction plans because Obamacare explicitly prohibited expansion of operating rooms, procedure rooms and beds.
There are exceptions, of course, but the onerous rules are so difficult to meet that many physician-owned hospitals won’t even try. Applications for exceptions must meet these requirements:
The county must have a population increase over the last five years that is at least 150 percent of the percentage increase in the population growth of the state.
The percent of total inpatient admissions must equal or be greater than the average percent for all hospitals located in the county.
The state’s average bed capacity must be less than the national average bed capacity.
The hospital’s average bed occupancy rate must be greater than the average bed occupancy rate in the state.
Hospitals that meet these requirements are allowed only one application over a two-year period, are limited to 200 percent growth and cannot expand beyond the main campus. In addition, the secretary of health and human services will solicit input from the local community on the hospital’s application.
The prohibition on expansion is just one aspect of the new rules governing physician-owned hospitals. They are also required to submit annual reports on each physician owner, investor and any other owners, including the nature and extent of their ownership and investment interests. Obamacare also restricts new investments.
Physician owners must tell patients they refer to their hospital about their ownership stake and disclose that the hospital is owned by doctors on the hospital’s Web site and advertising.
Hospitals that comply with all of the new regulations under Obamacare still face the prospect of an audit from the Department of Health and Human Services. And physicians who are found in violation of the transparency rules are subject to fines of up to $1 million. – Rob Bluey
Goliath lobbies Congress to crush David
There are about 5,800 community hospitals, but only 260 that are physician-owned. The disparity in numbers is especially evident on Capitol Hill, where community hospital lobbyists have spent nine years seeking passage of onerous regulations aimed at their far less numerous rivals.
The American Hospital Association and its state affiliates spent more than $18 million on lobbying in 2009. The Federation of American Hospitals chipped in nearly $4 million last year. Together, they are leading the charge against physician-owned hospitals that began nearly a decade ago.
The fight is as lopsided as any in Washington. Physician Hospitals of America, the advocacy group representing these hospitals, spent a mere $300,000 on lobbying in 2009. Though badly outgunned, PHA has for years been able to stave off repeated attempts to curtail the growth of physician-owned hospitals. That ended with Obamacare. The new law includes numerous provisions that make expansion or new construction of physician-owned hospitals virtually impossible.
The AHA defends its lobbying efforts as necessary to protect the nearly 5,000 hospitals it represents. Ellen Pryga, director of policy, didn’t know what percentage of time or money was spent on the issue of physician-owned hospitals, but she noted the association covers a variety of issues.
The Center for Responsive Politics, which tracks lobbyist spending at OpenSecrets.org, puts the American Hospital Association at No. 5 on its list of the top spenders between 1998 and 2009. The association spent nearly $175 million during that span, falling just below retiree giant AARP and slightly above the Pharmaceutical Research and Manufacturers of America, the trade association of drug makers.
The AHA also operates a large political action committee. The group’s campaign contributions have overwhelmingly filled Democratic coffers in recent years. In fact, 72 percent of the association’s nearly $1 million in political spending went to Democrats this political cycle. That’s up from 63 percent during the 2008 political cycle, when the association spent $2.1 million. – Rob Bluey
How did this happen?
The new regulations imposed on physician-owned hospitals can be traced to strong opposition from competing community hospitals and their lobbyists in Washington, D.C. The American Hospital Association and its affiliates spent more than $18 million on lobbying in 2009; the Federation of American Hospitals added nearly $4 million.
In contrast, Physician Hospitals of America spent a grand total of $300,000.
With the cards stacked against them in Congress, many new hospitals are rushing to complete construction to secure their Medicare certification by Dec. 31. Those that are already in operation are dispirited about future expansion but remain committed to their mission.
“Our goal is to serve the people sitting in the big hospitals with more dignity and respect — and to get them prompt care,” said Dr. Yasin Kahn, chief executive of Westfield Hospital in Allentown, Pa.
Kahn rebutted claims from the American Hospital Association that physician-owned hospitals cherry-pick the most profitable patients. More than 90 percent of the patients at Westfield Hospital aren’t affiliated with the hospital’s partners. His hospital takes pride in a lower nurse-to-patient ratio than the community hospital and an efficient emergency room with a 15-minute wait.
“This bill basically kills the entrepreneurship and competitive spirit of physician-owned hospitals,” Kahn said. “How do we serve all the people they’re planning to bring in if we can’t expand? Are they going to overburden the local community hospitals?”
The American Hospital Association maintains that the 5,000 community hospitals it represents will be able to care for the additional Americans who will be covered under Obamacare. Ellen Pryga, director of policy, defended the new regulations on physician-owned hospitals as necessary to streamline patient care and avoid conflicts of interest on patient referrals.
“When physicians control where their patients go, it’s a competitive advantage for physician owners,” Pryga said. “They can direct patients on a whole variety of factors, some of which are going to be the patients’ needs and others of which are going to be in the physicians’ financial interest.”
Such assertions keep Molly Sandvig, executive director of Physician Hospitals of America, on her toes. She tracks developments at the 260 physician-owned hospitals and others under construction.
“At a time when we should be looking for additional ways to provide more access, this is going to have the opposite effect,” Sandvig said of Obamacare. “New hospitals that were under development are not going forward right now. That hurts the patient by limiting access to high-quality care. It hurts communities where these hospitals were going to be built, and it hurts the health care market by putting thousands of jobs at risk.”
Sandvig estimated 25,000 jobs are at risk in 37 states. Shovel-ready construction jobs for new and expanding hospitals will also evaporate, as will physicians’ ability to rescue inner-city hospitals and build in rural communities.
Rob Bluey is director of the Center for Media and Public Policy at the Heritage Foundation.
