Doc-owned hospitals idling away
Reform law stymies physician-owned projects
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.