Luxury Hospitals Pose Threat to Trauma Centers

Specialty hospitals might flatten the revenue general hospitals need to keep their ERs, trauma centers, intensive care units and medical wards open.

IN the rooms at Thousand Oaks Surgical Hospital, wood-crafted cabinetry hides ugly wires and oxygen lines. Wall-to-wall windows offer a serene panorama of the Santa Monica Mountains.

There is a couch that pulls out into a bed for family members, a carpeted floor, a flat-screen television set and a roomy bathroom stocked with plenty of plush towels and a cozy waffle-quilt bathrobe. "The rooms are bigger, the food is like eating in a fancy restaurant....There's no comparison," says Jack Light, 70, of Westlake Village, who had a partial knee replacement there in late 2005.

"The service at the hotel ... "

Whoops. He meant to say hospital.

His verbal slip could have come straight out of the hospital's marketing plan. Thousand Oaks Surgical Hospital, one of a new breed of doctor-owned, for-profit specialty hospitals, was designed to look and feel like a vacation resort. "They're like four-star hotels," says Gerald Kominski, associate director of the UCLA Center for Health Policy Research. "They're offering a luxury experience."

Hospitals like this might be the wave of the future, providing patients with care that is highly specialized, excellent, comfortable, efficient, courteous and largely infection-free. They might also be part of an economic tsunami that flattens the revenue general hospitals need to keep their emergency rooms, trauma centers, intensive care units and medical wards open -- services that no one covets, but anyone could need, at any unexpected, vulnerable moment.

Such a threat prompted Congress, in 2003, to impose an 18-month moratorium on building more for-profit specialty hospitals. (Right now there are about 100 nationwide, including at least eight in California and one -- Thousand Oaks -- in Southern California.) Congress also worried that physicians referring patients to hospitals they owned could represent a conflict of interest that might affect medical care.

The moratorium was lifted in June 2005, but it could be an additional six to eight months before the next crop of medical entrepreneurs might start breaking ground and pouring concrete. That's because the government is reexamining payment formulas for medical procedures before it gives the go-ahead for Medicare patients to be treated at any new specialty hospitals.

But when the government's work is done, the physician-owned specialty hospitals that already exist will likely be joined by others. "They were growing at the rate of 30% to 40% a year before the moratorium," says Caroline Steinberg, vice president for trends analysis at the American Hospital Assn. "I think if they lift any kind of moratorium, they'll proliferate very rapidly."

To understand why that might present a problem, one has only to look at the types of patients the new hospitals serve -- and also understand how profit is distributed in America's healthcare system. The new specialty hospitals of concern are heart hospitals partially owned by cardiac surgeons, and surgical hospitals partially owned by orthopedic and other surgeons, and urologists.

They concentrate on bypass surgery, angioplasty, knee and hip replacements, stomach stapling, prostate removal and sports medicine -- all of which turn a tidy profit.

None of them serve traditional money-losers for hospitals such as patients who require not procedures but extended medical care -- for AIDS, cancer, diabetes or pneumonia. They don't serve victims of violence, auto accidents, skiing mishaps and fires, none of whom are money-makers. No one is scrambling to open for-profit trauma centers or for-profit AIDS hospitals.

Instead, critics charge, these doctor entrepreneurs are skimming the cream, building palace-like facilities and referring their most healthy and profitable patients to their own hospitals. Sicker, more costly patients continue to go to community hospitals, skewing the mix of patients and putting already financially strapped local hospitals in an even deeper bind.

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