House Bill 71, sponsored by State Representative Jon Peterson ( R - Delaware ), had its second hearing before the House Health and Family Services Committee on April 30, 2003. House Bill 71 prohibits a physician or podiatrist from making certain referrals for inpatient hospital services and makes other revisions to the law prohibiting certain referrals for designated health services. The committee hearing lasted three hours, and members heard from both opponents and proponents of the legislation. The AMC/NOMA is ACTIVELY OPPOSED to HB 71. The Center for Studying Health System Change recently released a study on the subject of physician ownership. To view a copy of that report go to www.hschange.org
Individuals Testifying in Opposition to House Bill 71
Dr. Carl Berasi, a physician investor in the New Albany Surgical Hospital, testified as an opponent and said not only do physician-owned hospitals pay state taxes but that the New Albany Surgical Hospital has pledged to contribute five percent of revenue to charity care. The non-profit hospitals receive a tax exemption to provide charity care; however, Mount Carmel contributes only 1 percent of revenue toward charity care and Ohio Health contributes only 0.25 percent. He said that opponents of physician ownership in hospitals have provided no evidence or figures to back their claims and accusations.
Berasi cited a study showing that for-profit specialty facilities have a lower mortality rate than non-profits and said that some of the best hospitals in the world, such as the Cleveland Clinic and the Mayo Clinic, were started by doctors. He said that the self-referral argument is just a way for hospitals and hospital CEO's to push doctors out of competition. He referenced the Stark legislation noting that conflict of interest in inpatient hospitals was exempted because physicians are actively participating in the process rather than simply accepting the gains of referrals. He said self-referral occurs every day in medicine and not only does the State Medical Board oversee doctors but doctors take an oath to put patient care first.
Ken Howell, CEO of Dayton Heart Hospital, also testified as an opponent and said that the bill limits competition, protects turf and creates a monopoly for non-profit hospitals. He said that despite claims by the opposition, facilities such as the Dayton Heart Hospital do not cherry-pick patients who are well insured or who are lucrative to treat. In fact, his hospital treats higher rates of those who are sicker and have more complex problems than do other Dayton area hospitals and 8% of their care-giving goes to the uninsured or Medicaid patients. He said that his community has been best served by competition and the survival rate of those with heart complications has dramatically improved in the Dayton area since the Dayton Heart Hospital opened thee years ago. In addition, the other community hospitals in Dayton have not been threatened but instead have continued to grow and to become more profitable.
Dr. Ajay Mangal, Butler County Surgical Center, testified in opposition and said his facility wants to expand to be inpatient. He said that this issue only seems to be a problem in Columbus and the bill severely undermines the for-profit systems and limits patient care.
At the end of opponent testimony, the panel received questions from Committee members. Representative Michelle Schneider ( R - Cincinnati ) said it seemed community hospitals were just afraid of being beat at their own game and are trying to limit competition despite having lobbied for the removal of Certificate of Need (CON). Dr. Berasi said that the large hospital systems are afraid of physicians regaining control and it is financially profitable for them to remain non-profit. Schneider said it seems that non-profit hospitals require federal subsidies and state tax-exemptions but for-profits provide state dollars.
Representative Shirley Smith ( D - Cleveland ) was concerned that specialty hospitals may be bad for the uninsured and the working poor and asked Dr. Berasi what classes the New Albany Surgical Center would be willing to treat. Berasi said that for-profit hospitals pay taxes and non-profits do not and if all hospitals in Ohio were for-profit the state could provide much greater charity care. He added that he hoped every patient the hospital was medically qualified to treat would be treated at his facility and that no one would be refused for follow-up care.
Representative Diana Fessler ( R - New Carlisle ) said she didn't understand the point of the bill and said that the loss created by the bill would be astronomical. Berasi said that the large hospitals are trying to make a test case out of the New Albany facility in order to deter physicians from starting such hospitals in the future. Fessler noted that it is her understanding that federal Stark legislation seems to provide a safe harbor to inpatient hospital ownership.
Individuals Testifying as Proponents of House Bill 71
J. Nick Baird, Director of the Ohio Department of Health, testified as a proponent and said he is concerned with physician ownership of hospitals. He said he understands physicians would like to gain control of their work but that backup services at specialty hospitals might be needed if complications develop during a procedure and emergency care may be needed. In addition, Baird said that such facilities leave the uninsured and poor for the community hospitals to care for while siphoning from their revenue.
Larry Anstine, OSU Hospitals East, testified in support of the bill and said that specialty hospitals threaten the ability of community hospitals to compete. He gave a history of how OSU purchased St. Anthony's Hospital in 1999 and revived the hospital, which was on the brink of closure. He said that the hospital incurred losses during the past several years and is still fragile. He said that the New Albany Surgical Hospital would be a serous threat to their revenue.
Dr. David Yashon, a neurosurgeon from Columbus, also spoke as a proponent of the bill and said that profit motives will have an effect on patient care. He explained that most patients rely on their doctor to tell them to go for further treatment and what is best for the patient should always come first. Nothing can or should compete with that. Removing the profit motive will assure patient care comes first. He said that the bill would eliminate conflict of interest and make his job as a physician easier.
Mike Geyer, Bricker and Eckler law firm representing the Ohio Hospitals Association, spoke as a proponent and explained the history of the Stark legislation. He said studies have shown that physicians who owned clinical labs received 45% more laboratory services than Medicare patients in general and other studies have found similar results for other physician ownership scenarios. He explained that House Bill 71 only prevents physician investment in specialty hospitals but does not prohibit specialty hospitals all together.
At the end of proponent testimony, the panel took questions from Committee members. Representative Lynn Olman ( R - Maumee ) asked Dr. Baird why his testimony said that for-profits leave the uninsured to the non-profits when Dr. Berasi's testimony disputed that. He also said it was significant that the New Albany Surgical Hospital was promising five percent to charity care while non-profits average less than one percent. Baird said he would not debate the statistics and did not have the data to refute Barasi's comments but suggested that the Ohio Hospital Association surely had data.
When Representative Schneider asked about returning to CON or creating licensure, Dr. Baird refused to discuss licensure and Rep. Schneider said the consumer should be in charge. She asked Geyer if they should tell the physicians who built the new hospital with "sweat equity" in hopes of the American Dream, "too bad?" Geyer said that the bill does not prevent competition. Schneider openly disagreed with him.
Chairman Greg Jolivette ( R - Hamilton ) asked Dr. Baird to make a distinction between inpatient and outpatient facilities. Baird said it is a difference of magnitude and resource commitment. Jolivette asked if Baird would support the elimination of economic credentialing of physicians, where investor physicians have their credentials revoked for investing in competing facilities rather than poor care. Baird replied that this is not an issue for the Department of Health to address. Jolivette was surprised that patient access would not be a concern for the Department.
Representative Chuck Blasdel ( R - East Liverpool ) said he views this issue as a microcosm of the greater healthcare system and that while it is true that we do not have a free market, perhaps that is the problem. He suggested that the consumer needs to have more responsibility. Dr. Baird agreed but said that this trend is not the solution and said general healthcare reform is needed. Blasdel asked Geyer whether he agreed that non-profit hospitals have an unfair competitive advantage because they receive state and federal subsides and Geyer replied that OSU reinvests in itself.
Representative Linda Reidelbach ( R - Columbus ) asked Dr. Baird why we shouldn't allow specialty hospitals and noted that the bill would close the Dayton and Butler hospitals. Baird said he would not address grandfathering current existing hospitals.