Testimony before the House Health and Family Services Committee

Wednesday, June 25, 2003

House Bill 71

   

Offered by Mary Jo Welker
Chair, The Ohio State University Department of Family Medicine

Associate Dean for Primary Care

CEO, OSU Primary Care Network

 

Chairman Jolivette, members of the House Health and Family Services Committee, thank you for the opportunity to speak in support of House Bill 71, the measure being considered to extend state law on physician self-referral to inpatient hospitals.

I appeared before you in December to express support for this legislation because of the threat to our healthcare system posed by physician-owned boutique facilities (which incorrectly refer to themselves as “hospitals”).  Since my testimony, that threat has been recognized by a growing list of independent studies of these facilities by:  the General Accounting Office, the Robert Wood Johnson Foundation’s Center for Health System Change, and by several members of Congress.  Mary Gallagher from the Ohio Hospital Association will provide additional details on these developments.

I appear before you today to review some of the alternatives to H.B. 71 that have been discussed, and to give you my perspective on them as a family physician and as an educator of young doctors.

Charity Care

I understand that some have suggested requiring physician-owned boutiques to provide a certain level of charity care.  While I support efforts to increase charity care provided by all healthcare providers, such a requirement would not deal with the fundamental patient cherry-picking strategy pursued by boutique facilities.  Boutique facility companies and their physician partners know that hospitals are reimbursed for some procedures more profitably than others.  They also know that they are reimbursed for each particular procedure on an average basis, not only by Medicare and Medicaid but also by private insurers.  Physician-owners of boutique facilities stand to profit by taking advantage of their ability to send below-average cost patients to their own facilities and above-average cost patients to community hospitals.  This is of course encouraged by their for-profit corporate partners, who invest in these facilities because of this very opportunity to take advantage of the way healthcare is financed.  Requiring a level of charity care would do nothing to deal with this fundamental issue.

Disclosure

I understand that some have suggested requiring physicians to disclose their interest in boutique facilities to patients.  Although such disclosure might make sense from a consumer education standpoint, it would simply not address the inherently unfair business model of physician-owned boutique hospitals.  Patient awareness or acquiescence with this model would not deal with the problem.  And with the number of disclosures patients are required to sign prior to undergoing any major medical treatment, it would likely go unnoticed or at least not understood by most.

         Required Emergency Rooms
        There have been discussions about requiring emergency rooms at boutique facilities, such as the New Albany Surgical Center, so that they accept a fair share of this unprofitable service.  While this sounds like a good idea, it again would simply not address the fundamental issue of cherry-picking.  And the location of the New Albany facility itself indicates the impracticality of such a requirement.  Even if New Albany had some sort of emergency room, its location would simply not allow it to take a significant volume of emergency patients from the community hospital system.

         Required Licensure of Hospitals
        Finally, I understand that there has been a suggestion to require hospitals to be licensed, so that the licensing process could ensure that all hospitals provide appropriate benefit to the community.  Currently, not-for-profit hospitals must provide appropriate community benefits pursuant to existing IRS requirements as well as state law.  (The Charitable Foundations Section of the Ohio Attorney General’s Office is staffed to investigate and prosecute those failing to meet the state law requirement.)  And again, any such requirement or regulatory model simply cannot correct for the basic design of boutique facilities.  Their business model is to concentrate on a relatively few procedures which are reimbursed at higher rates, and then to steer the most profitable patients to their own facilities, which are not staffed or equipped to handle the most expensive cases.  The most expensive cases are necessarily left for community hospitals.

 Conclusion

As I stated in my previous testimony, it’s not an easy time for anyone directly involved with health care delivery. Doctors, like many other professionals, are feeling the pressure of significantly higher education debt loads and some stagnation of their earning ability. It’s understandable, given the deregulation of the hospital industry, that some doctors would try to take advantage of the opportunity to earn more in a for-profit health facility in which they are investors. It doesn’t make it the right thing to do, however, for our healthcare system.  Limited-service healthcare facilities may be the best way for certain healthcare services to be delivered, but not with the distorting market advantage of physician ownership.  H.B. 71 is the right solution to this problem.

Mr. Chairman, members of the Committee, thank you again for the opportunity to speak in support of House Bill 71. I would be happy to answer any questions you may have.