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GAO-05-647R 1 (2005-05-19)

handle is hein.gao/gaocrptartf0001 and id is 1 raw text is: i ai Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 May 19, 2005 The Honorable Charles E. Grassley Chairman The Honorable Max Baucus Ranking Minority Member Committee on Finance United States Senate Subject: Specialty Hospitals: Information on Potential New Facilities Beginning in the 1990s, there was a substantial increase in the number of short-term acute care hospitals that primarily treat patients with specific medical conditions or who need surgical procedures. Advocates of such hospitals, commonly referred to as specialty hospitals, contend that their focused missions and dedicated resources can both improve quality and reduce health care costs. Critics contend that specialty hospitals siphon off the most profitable procedures and patient cases, typically without providing emergency care or other vital community services, and thus erode the financial health of neighboring general hospitals. Critics also contend that the ability of physicians to invest in a specialty hospital and then refer patients to that hospital creates financial incentives that may inappropriately affect physicians' clinical and referral behavior. In 2003, we issued two reports on the growth, characteristics, and performance of specialty hospitals. More than two-thirds of the 100 specialty hospitals we identified as being in existence in June 2003 had opened their doors since the beginning of 1990.2 The specialty hospitals in existence in fiscal year 2000, the most recent year for which we then had data, accounted for about I percent of Medicare spending for inpatient services. We also identified an additional 26 specialty hospitals under 'Specialty Hospitals: Geographic Location, Services Provided, and Financial Performance, GAO-04- 167 (Washington, D.C.: Oct. 22, 2003) and Specialty Hospitals: Information on National Market Share, Physician Ownership, and Patients Served, GAO..-0,3-68,'3R (Washington, D.C.: Apr. 18, 2003). 2We considered a hospital to be a specialty hospital if the diagnosis-related group (DRG) classification for at least two-thirds of its Medicare patients (or two-thirds of all of its patients where such data were available) fell into no more than two major diagnosis categories, such as diseases of the circulatory system, or if at least two-thirds of its patients were classified in surgical DRGs. We excluded hospitals that were government owned or that specialized in providing long-term care or otherwise had missions largely distinct from the missions of short-term, acute care hospitals. Our analysis included specialty hospitals that were owned, in whole or in part, by physicians and those that had no physician owners. GAO-05-647R Specialty Hospital Moratorium

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