DaytonDailyNews.com

The following are edited excerpts from congressional testimony from the American Medical Association on specialty hospitals given in May 2005.

There are numerous factors that have contributed to the growth of specialty hospitals including:

• Many physicians are frustrated over hospital control of management decisions and investment decisions that affect their productivity and the quality of patient care. Physicians often have little or no involvement in governance and management, control over reinvestment of profits in new equipment, or influence over scheduling and staffing needs for cases performed in the operating room.

They believe that hospitals are not collaborating with them to align hospital processes or engage in joint ventures. Physicians who invest in specialty hospitals are able to increase their productivity, improve scheduling of procedures for patients, maintain appropriate staffing levels and purchase desired equipment.

• Medicare and private insurer payment rates are perceived to be relatively high for certain services, often exceeding hospital costs associated with these services, and relatively low for other hospital services.

• Payments for physician professional services have declined while the costs of medical practice, such as professional liability premiums, have

continued to escalate substantially. As a result, some physicians have sought to increase their practice revenues with the facility fees derived from investment in a speciality hospital.

• Advances in technology (e.g., minimally invasive surgery) have allowed care to be provided in a variety of settings.

• Data show that facilities that focus on certain procedures and perform a significant number of them have better quality outcomes.

• Business partners willing to provide capital and management expertise are more readily available.

It is disingenuous for the hospital industry to claim that physicians have a conflict of interest when many general hospitals engage in self-referral practices. One hospital association claims that a "community hospital that tried to buy admissions in this way would be outlawed."

Ironically, however, general hospitals often channel patients to their facilities and services. They do this mainly by acquiring primary care physicians' practices or by employing primary care physicians, and requiring those physicians to refer all of their patients to their facilities for certain services such as X-ray, laboratory, therapy services, outpatient surgery and inpatient admissions.