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Letter to the Honorable Sam Johnson 1 (August 2007)

handle is hein.congrec/cbo9303 and id is 1 raw text is: CONGRESSIONAL BUDGT OFFICE Peter R. Orszag, C U .S. Congress ashington, DC 20515 August 17, 2007 Honorable Sam Johnson U.S. House of Representatives Washington, DC 20515 Dear Congressman: As you requested, I am pleased to provide information on CBO's estimate of the budgetary impact of section 651 of H.R. 3162, the Children's Health and Medicare Protection Act of 2007. Under current law, physicians are prohibited from referring patients to a provider of health care services in which the physician has a financial interest. There are exceptions to that prohibition, however, for referrals to hospitals that serve predominantly rural populations or to a hospital in which the physician's financial interest is in the whole hospital (in contrast to an interest in some discrete component of the hospital). Section 651 would require physician-owned hospitals to meet certain requirements to continue qualifying for an exception from that prohibition. Those requirements would include specific limits on the percentage of the hospital that physicians may own and on the allocation of financial returns on those investments, and would have the effect of limiting the number and size of physician-owned specialty hospitals. CBO estimates that enacting that provision would reduce Medicare spending by $0.7 billion over the 2008-2012 period and $2.9 billion over the 2008-2017 period. In recent years, the number of physician-owned specialty hospitals (which generally provide orthopedic, cardiac, or surgical services) has grown rapidly. CBO expects that growth will continue, partly in response to real declines in Medicare's payment rates for physicians' services under the sustainable growth rate system. Accordingly, CBO projects that, under current law, payments to physician-owned specialty hospitals will grow from about $1.3 billion in 2007 to more than $2 billion by 2011, and continue to grow in future years.

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