A Health Threat We're Not Treating

By Newt Gingrich
Saturday, November 12, 2005

A growing number of hospitals in America are setting themselves up to deal with just one particular area of medicine, such as cardiovascular procedures or orthopedics. The spread of these specialty hospitals, as they are called, demands our attention. They could be a force for good, providing better health care at lower cost for consumers. Or they could end up distorting the health care system in ways that impose heavier costs on taxpayers.

The rules that define legitimate behavior by specialty hospitals will play a decisive role in determining whether they become primarily instruments of high profits -- profits produced by clever schemes to minimize risk and leave all the expensive cases to community hospitals and taxpayers.

I'm strongly in favor of legitimately designed specialty hospitals in which a focus on a specific set of skills and procedures enables doctors and staffs to maximize their efficiency. But I am just as strongly opposed to the emergence of specialty hospitals that create special relationships with doctors designed to cherry-pick only the easy cases for certain hospitals.

The greatest dangers arise when doctors have a direct financial interest in a specialty hospital. It's just human nature for them to increase their own income by the simple act of giving the specialty hospital -- with which they are associated and from which they draw compensation -- all the easy and inexpensive cases, while sending everything risky and expensive to the larger community hospital. It's not hard to see the financial damage this could do to community hospitals.

Congress recognized years ago that there are certain hazards in situations where there is an economic relationship between a hospital and a doctor. Hospitals that provide economic rewards and incentives to doctors could distort medical decisions. As a result, Congress passed what is known as the Stark anti-kickback legislation to protect the integrity of medical decision making by preventing hospitals from influencing the distribution of patients through economic inducements.

But Congress has not taken account of the fact that a direct doctor investment in a specialty hospital gives the physician a greater economic incentive to distort medical decisions for economic self-interest than anything ever envisioned by Stark. Some doctors are making as much or more money out of their ownership of stock in specialty hospitals as they make practicing medicine.

Clearly the danger of community hospitals being undermined and economically crippled while specialty hospitals realize profits not through greater efficiency and effectiveness (which would be good) but through more clever cherry-picking of low-risk, high-profit cases is a real threat to the integrity of the health system. It is also a threat to individuals who might find themselves with complex illnesses and no appropriately specialized hospital willing to take them in for treatment.

Congress should insist on hospital ownership rules that allow doctors to invest in specialty hospitals in which they do not practice but that forbid doctors from having ownership in a hospital in which they do practice.

Alternatively Congress should consider establishing a law requiring that specialty hospitals take all the cases in their area of specialization, the difficult and complex (and expensive) as well as the simple and profitable. What Congress should not do is allow the current market-distorting and community hospital-destroying system to continue unchecked.

As a free-market conservative I strongly favor competition. In fact, I think Adam Smith's description of markets creating more choices of higher quality at lower cost was one of the great breakthroughs in human productivity. His publication of "The Wealth of Nations" in 1776 was as liberating as our own Declaration of Independence the same year.

Yet Smith recognized that sellers often try to create phony markets. He warned that when businesses get together they are often conspiring against the consumer. Businesses can see a financial interest in rigging the market so that it minimizes competition or sets prices. This same temptation to conspire against the consumer can be found in the emerging specialty hospital movement.

Congress should act now to protect our health system by establishing the right rules for fair competition.

The writer, a former Republican representative from Georgia and speaker of the House, is the founder of the Center for Health Transformation.

© 2005 The Washington Post Company