Testimony before the Senate Health, Human Services and Aging Committee

Wednesday, November 20, 2002

 

Offered by John Prout

President and CEO

TriHealth Inc., Cincinnati

 

on behalf of the

Ohio Hospital Association

 

 

 

Chairman Wachtmann, members of the Senate Health, Human Services and Aging Committee, thank you for the opportunity to speak to you today in support of Senate Bill 309 — legislation that is critical for the future of Ohio’s health care delivery system.

 

            I am John Prout, President and CEO of TriHealth Inc., a Cincinnati health care system that includes Good Samaritan Hospital and Bethesda North Hospital, as well as more than 50 outpatient locations. TriHealth employs more than 7,200 caring individuals, provides medical facilities used by nearly 2,000 greater Cincinnati physicians to treat their patients and draws 1,600 volunteers into rewarding service opportunities.

 

            I also come to you today as a member of the board of the Ohio Hospital Association, which has taken a position in support of Senator David Goodman’s conflict of interest legislation.

 

            Some of you may view Senate Bill 309 as a Columbus bill, or maybe as a Dayton bill. I am here to tell you it is legislation that is vitally important to health care providers throughout the state. In my position on the OHA Board and in chairing the GCHC Board, I have seen hospital support for clear public policy on physician conflict of interest grow in recent months as those of us who are privileged to operate full-service community hospitals have come to understand how a growing national trend toward development of physician-owned, limited-service specialty hospitals threatens our ability to continue serving our communities’ needs, and threatens to put physicians’ financial interests before their patients’ needs.

 

Senate Bill 309 seeks to close a loophole in current law and to clarify public policy on conditions under which physicians may refer patients for certain health care services.

 

Ten years ago — on Dec. 17, 1992, to be exact — in the waning days of the 119th Ohio General Assembly, state law was enacted consistent with federal law to make it clear that physicians could not refer their patients to clinical laboratories in which they had an ownership interest.  This was the first of a number of so-called “Stark” provisions, named for California Congressman Pete Stark, that have been enacted as health care delivery has evolved in this country to guard against situations in which physicians’ business interests threaten to get in the way of their medical decisions.

 

Congress passed the original Stark law after independent federal studies by the Office of Inspector General and the General Accounting Office demonstrated that physicians with ownership interests referred patients more often to their own clinical labs than physicians who did not own labs.  In recent years, home health services and outpatient prescription drugs have been added to the list of services to which Ohio physicians with ownership interests are prohibited from sending their patients. The list of federal Stark prohibitions is even longer.

 

However, in both state law and federal law, there currently exists a loophole for inpatient hospital services.  I submit to you the only reason current law does not prohibit physicians from sending their patients to hospitals in which they have an ownership interest is that limited-service, specialty hospitals did not exist until recently. Public policy makers previously had little reason to believe a physician who invested in an entire hospital could influence that investment by patient referral decisions.

 

The exemption in current state and federal law allows doctors to send patients to hospitals they own as long as their ownership interest “is in the hospital itself and not merely in a subdivision of the hospital.” [O.R.C. 4731.67 (F) (3)]

 

That exemption was consistent with health care delivery as it existed in the late 1980s and early 1990s.  While Ohio has historically had fewer for-profit hospitals than many states, hospitals here and elsewhere have generally been known as full-service institutions, with their financial viability dependent on a full range of services.

 

Until fairly recently, that had been the case since the establishment in 1823 of Ohio’s very first hospital, and the first hospital in the nation staffed exclusively by medical school professors — the Cincinnati Commercial Hospital and Lunatic Asylum, forerunner of Cincinnati’s University Hospital.

 

            Now, however, that is changing. Largely in response to the whole-hospital exemption in state and federal Stark law, limited-service specialty hospitals are being developed across the country and drawing physician investors. These “boutique” hospitals focus on a medical specialty, such as orthopedics or cardiac services, and then allow physician investors the opportunity to ensure the success of their investments through their medical decisions, based on the patients they choose to send or not send to that hospital.

 

Despite any best intentions to enter into these investments to serve their patients, physicians cannot help but affect specialty hospitals’ corporate performance by their practice patterns because of these hospitals’ limited focus. Enactment of Senate Bill 309 will protect physicians, and their patients, from the temptation to let investment interests get in the way of medical decisions.

 

If you have heard anything about health care delivery in recent months, you have probably heard it is not easy to be a physician or to run a hospital these days, and that would be an accurate perception. With rising medical malpractice premiums and shrinking reimbursements for the care they provide, physicians have more incentive than ever to look for lucrative investment opportunities.  Senate Bill 309 would not take away the ability of doctors, or anyone else, to invest in specialty hospitals. Senate Bill 309 would not outlaw for-profit hospitals. Senate Bill 309 would not dictate where physicians are allowed to practice medicine. Nor would it prohibit the development of specialty hospitals. Indeed, the development of such centers of excellence is gaining increased support as a preferred approach for improving health care delivery.

 

            What Senate Bill 309 would do is make it clear that physicians who choose to invest in specialty hospitals will not be tempted to put financial considerations ahead of their patients.  And patients would not be placed in situations where their physicians have a financial conflict of interest.

 

            Please enact Senate Bill 309 to make Ohio public policy clear before the developing national trend of physician-owned, limited-service specialty hospitals takes hold in Ohio and puts financial considerations between doctors and their patients.

 

            Thank you for your thoughtful and prompt attention to this urgent issue. I am happy to answer any questions you may have.