Support true competition among hospitals

There is a little-known – but critical – law that helps ensure hospitals are able to care for their communities.  It is a ban on physician self-referral to hospitals in which they have an ownership interest. A permanent ban was put into effect in 2010 and eliminating it would raise the federal deficit by $500 million. The ban has long had bipartisan Congressional support and an initial moratorium on the practice of self-referral passed in 2003 under a Republican Congress and was signed into law by a Republican president. 

Unfortunately, today some in Congress want to eliminate the ban and allow these egregious and costly arrangements. Ill-advised legislation would allow new arrangements of this type to proliferate.  This would be a giant step backwards for patients, taxpayers, employers and community hospitals.  In addition, this legislation would invariably lead to an increasing burden on taxpayers and employers which is why the U.S. Chamber of Commerce has long expressed opposition to weakening current law.

{mosads}Eliminating the ban would result in gaming of the Medicare program and would jeopardize patient access to emergency care, potentially harm sicker and lower-income patients, and damage the safety-net provided by full-service hospitals.  These arrangements have been studied for more than 15 years by Congress, the administration and independent organizations such as MedPAC. The data is clear.  Several studies show that physician self-referral leads to higher per capita utilization of health care services, which can be costly to patients. This is the epitome of health care inefficiency and rising costs.

The reality is physician-owned hospitals typically provide only the most profitable services, such as cardiac, orthopedic or general surgery.  By steering their most profitable cases to facilities they own, physician-owners drain essential resources from full-service community hospitals, which depend on a balance of services and patients to provide expensive, life-saving services such as trauma centers, burn units and mental health services – vital services generally not provided by physician-owned hospitals.
In fact, almost half of physician-owned hospitals not only lack emergency rooms, but those that do often limit the scope of their treatment to minor ailments, and those that do not  are often ill-equipped to respond to medical emergencies that happen in their own hospitals.  Because many physician-owned hospitals often rely on 911 when emergencies arise, as identified by the Department of Health and Human Services Office of Inspector General, lifting the ban on self-referral raises numerous patient safety concerns. 

Further, physician self-referral is the antithesis of competition. Full-service community hospitals compete on the basis of quality, service and efficiency every day.  Competition is an important part of health care that can lead to improved care delivery.  But for health care competition to yield the results we want, this competition must be fair and free from conflict of interest.  Patients rely on their physicians to determine what care to get and where to get it.  When those decisions are colored by the financial incentives embedded in self-referral, patient well-being is jeopardized and the competitive model doesn’t work.   

Community hospitals strive to improve what they do every day as technology and medical techniques advance – all with the goal of providing a healing environment for all those in need.  Full-service hospitals take their mission of caring for communities very seriously and will continue to provide the best care possible to their entire community.
That is why we urge Congress to reject any attempts to skew the health care marketplace in favor of physicians who self-refer patients to hospitals they own.

Umbdenstock is president and CEO of the American Hospital Association, which leads, represents and serves more than 5,000 member hospitals, health systems and other health care organizations.