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Physicians More Likely To Treat Less Acute, More Profitable Patients In Specialty Hospitals That They Own, Health Affairs Article Says

Analysis Of Discharge Data Supports Objections Of Community Hospitals, Demonstrates Need For Ban On Self-Referral, Author Says

BETHESDA, MD — Arizona heart doctors who are part-owners of cardiac specialty hospitals were more likely than physicians with no ownership stake to treat low-acuity, high-profit cases in their own facilities and refer the more complex, lower-profit cases to community hospitals, according to a study published today on the Health Affairs Web site.

The study appears to confirm the objections of community hospitals, which have complained that the growth in the number of limited-service specialty hospitals in recent years has diverted profitable cases away from their operating rooms and limited their ability to absorb the costs of uninsured or money-losing patients.

Jean Mitchell, a professor of public policy at Georgetown University, analyzed six years of inpatient discharge data to compare the practice patterns of physicians who were owners of cardiac specialty hospitals in Phoenix and Tucson with those of physicians who only treated patients in competing full-service community hospitals with an accredited cardiac care program.

Mitchell finds that “physician-owners” treated proportionately more surgical cases classified as minor in comparison with nonowners. Those physician-owners also treated proportionately fewer cases classified as moderate or major when compared with nonowners. Physician-owners also treated a higher percentage of cases with one or two complicating conditions, but a lower percentage of cases with three or more complications.

In addition, physician-owners treated higher percentages of patients with generous insurance coverage, such as Medicare fee-for-service or commercial preferred provider organizations (PPOs), and lower percentages of patients enrolled in Medicaid and health maintenance organizations (HMOs).

“The analyses suggest that physician self-referral arrangements have major effects on physician practice patterns,” Mitchell says.

Sens. Charles Grassley (R-IA) and Max Baucus (D-MT) have introduced legislation that would ban physicians from referring patients to hospitals in which they have investment interest.

“The findings reported here provide evidence in support of these legislative actions,” Mitchell says. “Nevertheless, if such a prohibition is to be effective, it should require that physician-owners divest their investments in existing limited-service hospitals within eighteen to twenty-four months.”

The article can be read at content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.481.

Two accompanying Perspectives offer commentary on physician entrepreneurship: one by Jack Hadley and Stephen Zuckerman (Urban Institute), and the other by Allen Dobson and Randall Haught (Lewin Group). They can be read at content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.491 (Hadley/Zuckerman) and content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.494 (Dobson/Haught).

Mitchell’s research was supported by an unrestricted educational research contract between Georgetown University and the Sioux Valley Hospitals and Health System, Additional support was provided by institutional grants from Georgetown University.


Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. The abstracts of all articles are free in perpetuity. Web Exclusives are supported in part by a grant from the Commonwealth Fund.


©2005 Project HOPE–The People-to-People Health Foundation, Inc.