Doc-owned hospi­tals idling away

Re­form law stymies physi­cian-owned projects

Modern Healthcare - - FRONT PAGE - Andis Robeznieks

Mostly all their own­ers can do is sit and wait. They—de­pend­ing on one’s point of view—are ei­ther a bla­tant ex­am­ple of who has the po­lit­i­cal clout in the physi­cian-hospi­tal re­la­tion­ship or the rem­nants of a po­ten­tially de­struc­tive move­ment that failed to gain trac­tion.

They are the built and empty or stalled health­care con­struc­tion projects that were bankrolled by physi­cian in­vestors and failed to meet the dead­lines im­posed on them mid­pro­ject by the re­stric­tions on physi­cianowned hospi­tals in the Pa­tient Pro­tec­tion and Af­ford­able Care Act.

“Leg­isla­tively, it can’t get any worse,” said Dr. Sean Den­ney, a car­di­ol­o­gist who has led a group of 40-plus physi­cian in­vestors build­ing the $40 mil­lion, 40-bed Kear­ney (Neb.) Re­gional Med­i­cal Cen­ter, ex­plain­ing why wait­ing for the econ­omy to im­prove or ju­di­cial or leg­isla­tive ac­tion in his fa­vor is not nec­es­sar­ily a bad strat­egy.

In the mean­time, the hospi­tal sits in the Ne­braska plains, 42% built, heated and empty.

Con­struc­tion be­gan in March 2010. In April, Gov. Dave Heine­man signed leg­is­la­tion, sup­ported by the Ne­braska Hospi­tal As­so­ci­a­tion, ban­ning the is­suance of new hospi­tal li­censes from April 15, 2010, to Sept. 15, 2011. (A two-year mora­to­rium was orig­i­nally pro­posed.) Al­though crit­i­cal-ac­cess hospi­tals and fa­cil­i­ties whose con­struc­tion was started be­fore May 1 were ex­cluded from the pro­hibi- tion, the new hospi­tal was be­gin­ning to look unattrac­tive to lenders.

“We had to forge ahead with­out fi­nanc­ing, and we can thank the Ne­braska Hospi­tal As­so­ci­a­tion as much as the na­tional leg­is­la­tion for all the dif­fi­cul­ties we had,” Den­ney said. “When we started the pro­ject, it wasn’t pro­hib­ited by any stretch of the imag­i­na­tion.”

The Af­ford­able Care Act didn’t help. The law re­quired that in-progress projects needed to be done by Dec. 31, 2010, to be ex­cluded from pro­hi­bi­tions on new physi­cian-owned hospi­tals and ex­pan­sion of ex­ist­ing ones.

“In the midst of our con­struc­tion pro­ject, the health­care re­form act came through and it’s dif­fi­cult to ex­plain to lenders how that will play out,” Den­ney added. “That de­layed our fin­ish­ing the pro­ject on time.”

The NHA de­clined to speak on the record, but NHA Vice Pres­i­dent Bruce Rieker tes­ti­fied dur­ing a Feb. 24, 2010 leg­isla­tive hear­ing for the mora­to­rium. “If physi­cian-owned hospi­tals are al­lowed to siphon off the prof­itable cases, leav­ing the com­mu­nity hospi­tal with un­prof­itable cases, in time the com­mu­nity hospi­tal may be forced to dis­con­tinue cer­tain ser­vices, caus­ing ac­cess to care is­sues for res­i­dents in var­i­ous parts of the state,” Rieker said.

Good Sa­mar­i­tan Health Sys­tems, a 208-bed Catholic Health­care Ini­tia­tive af­fil­i­ate in Kear­ney, re­sponded in an e-mail to queries about the stalled com­peti­tor. “Di­vid­ing health­care re­sources in a com­mu­nity of less than 30,000 will un­der­mine the avail­abil­ity of ser­vices, putting the re­gion’s trauma cen­ter at risk.” There was talk of merg­ing Kear­ney Re­gional with Good Sa­mar­i­tan, but that stalled as well.

Fresno (Calif.) Sur­gi­cal Hospi­tal is near­ing com­ple­tion on a $30 mil­lion ex­pan­sion, but it may be a while be­fore the hospi­tal re­al­izes its orig­i­nal plans, which called for adding 24 beds, an in­ten­sive-care unit and re­mod­el­ing the out­pa­tient surgery cen­ter by Dec. 6.

Opened in De­cem­ber 1984 as an out­pa­tient surgery cen­ter, the Fresno Surgery Cen­ter was li­censed as an acute-care hospi­tal in April 1993 and of­fi­cially be­came the Fresno Sur­gi­cal Hospi­tal in 2006. It cur­rently has 31 beds and eight op­er­at­ing rooms. (It is li­censed for nine, but one was lost dur­ing ren­o­va­tions needed to meet Cal­i­for­nia’s seis­mic safety stan­dards.)

The hospi­tal re­ceived at­ten­tion for its hotel­like in­pa­tient suites and top-of-the-line food. Kris­tine Kas­sahn, the hospi­tal’s CEO and a reg­is­tered nurse, also touted Fresno Sur­gi­cal’s at­ten­tion to cus­tomer ser­vice, which calls for staffers to check in on pa­tients ev­ery 30 min­utes. As proof of su­pe­rior clin­i­cal out­comes, Kas­sahn cited how the hospi­tal has re­ceived six con­sec­u­tive Health­grades Joint Re­place­ment Ex­cel­lence awards, as well as top marks in spine, back, neck and prostate surg­eries.

The best near-term out­come its physi­cian own­ers can hope for on the con­struc­tion pro­ject, how­ever, is the re­turn of its ninth op­er­at­ing room.

Kas­sahn said the hospi­tal does not plan to rent the new space for of­fice use or other non­clin­i­cal op­tions, and main­tained that the fo­cus would re­main on ex­pand­ing clin­i­cal ca­pac­ity and to be ready to use it if the re­form law is struck down.

“We’re hop­ing the reg­u­la­tions change,” she said. “We’re mov­ing for­ward with the vi­sion. It’s a huge ex­pense, but we think that it’s im­por­tant to be pre­pared.”

Amer­i­can Hospi­tal As­so­ci­a­tion spokes­woman El­iz­a­beth Li­etz said the or­ga­ni­za­tion is not wa­ver­ing in its sup­port of the re­stric­tions im­posed on physi­cian-owned hospi­tals in the re­form law. “We can’t speak to spe­cific hospi­tals,” she said.

“We sup­port the (con­struc­tion) dead­lines and we sup­port the law, be­cause we be­lieve that physi­cian own­er­ship of hospi­tals drives up costs and hin­ders ac­cess to care for the en­tire com­mu­nity,” Li­etz added. “I think Congress has been pretty clear about its po­si­tion on this is­sue.”

Fresno Sur­gi­cal Hospi­tal is al­most fin­ished with an ex­pan­sion that won’t be used un­less the re­stric­tions on physi­cian-owned hospi­tals in the re­form law are lifted.

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