The Health Care Investor : Healthcare Lawyers & Attorneys for Life Science Companies & Investors

In prior posts I’ve discussed the significant impact of the Patient Protection and Affordable Care Act (the PPACA, more commonly referred to as the healthcare reform legislation) on the physician-owned hospital industry.  Section 6001 of the PPACA stymies growth of the industry by prohibiting expansion of existing physician-owned hospitals and bans any new physician-owned hospitals that are not Medicare-certified by December 31, 2010 (i.e. hospitals violating those limitations will not be permitted to bill Medicare/Medicaid for referrals made by their physician owners). Although a number of exceptions apply to the expansion prohibition, most industry analysts believe meeting the exceptions will be challenging to virtually impossible for existing physician-owned hospitals.

According to a press release issued today by Physician Hospitals of America (PHA), the trade association for the industry, there are approximately 265 existing physician-owned hospitals, 29 of which are scheduled to open and receive their Medicare certification by December 31, 2010. An additional 45 hospitals are currently under development and are not expected to be open or Medicare-certified by December 31, 2010. According to PHA, there were also 39 hospitals that were previously under development but were abandoned as projects due to passage of Section 6001.

In response to Section 6001, PHA and Texas Spine & Joint Hospital (TSJH) jointly filed suit today in U.S. Federal Court, Eastern District of Texas, challenging the constitutionality of Section 6001 on grounds that the law is a violation of due process and equal protection rights, and that the Section is void due to a contradictory, vague and arbitrary nature. TSJH is a privately owned hospital specializing in orthopedic and spine surgery, procedures, and tests which had sought and won local zoning approval to expand its facility with an additional 20 Medicare beds, which expansion project would now be prohibited by Section 6001.

Industry supporters and opponents will be carefully following progression of the lawsuit as the resolution is anticipated to have a profound impact on the ability of the physician-owned industry to thrive.

Scott Oostdyk and Victor Moldovan of McGuireWoods are representing PHA and TSJH in the lawsuit. 

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In a prior post, I discussed the legislative challenges faced by physician-owned specialty hospitals during the past decade.  One powerful weapon specialty hospitals have in the fight against industry adversaries are research findings showing that specialized surgical care results in better outcomes and fewer serious post-surgical complications such as blood clots, infections and heart problems.

One such study was released online in the British Medical Journal on February 11th.  As reported by Becky Soglin of The University of Iowa Health Care Media Relations, the findings were based on data for nearly 1.3 million Medicare patients who received hip or knee replacement surgeries between 2001 and 2005 at 3,818 hospitals in the United States. The results grouped hospitals into five levels of specialization.  The most specialized hospitals had fewer complications or deaths within the first 90 days after a surgery than less specialized hospitals did.  For one example as cited by Ms. Soglin, the rate of death for patients who had hip and knee replacements was twice as high at the least specialized hospitals compared to patients treated at the most specialized hospital -- 1.4% compared to 0.7% within the first 90 days after surgery. 

Of course both sides of the specialty hospital debate cite statistics relating to the impact of specialty hospitals on the U.S. healthcare system at large.  For specialty hospitals, continued focus on impressive clinical outcomes is critical.  Additionally, specialty hospitals have become popular among patients for their high quality facilities and highly focused care.

Industry adversaries include political powerhouses like the American Hospital Association, which claim that specialty hospitals waste government funded healthcare dollars by permitting physicians to refer to entities in which they own interests and cherry-pick patients with the most lucrative insurance coverage thereby overburdening general acute hospitals with excessive indigent populations.

The future of national healthcare reform efforts is unclear.  Even if specialty hospitals again escape restriction in a consolidated healthcare reform bill,  it is certain that specialty hospitals will not be forgotten by their opponents. 

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