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              The rapid growth of specialty hospitals in the past decade which are mostly privately owned by physician handling special cases such as orthopedic and cardiac care has raised many questions on the ability of community hospitals ability to compete and offer better quality services (Tynan, November, Lauer, Pham & Cram, 2009). Critiques have argued that most special hospitals have tend to attract patients who are not critically ill and those who are privately insured as compared to community or general hospitals which have to deal with cases of patients who are underinsured or not insured at all as noted by Tynna et al..(2009). Therefore community hospitals find themselves operating at a loss with the inability to subsidize their medical services to patients. The special hospitals tend to pull away patients with Medicare from community hospitals leaving them unable to compete for favorably with special hospitals (Tynan et al.., 2009). Since general hospitals relied on profitable services and treatments to patients to subsidize unprofitable services and patients, critiques feared they may curtail the vital special services such as critical emergency cases, shun psychiatric units and even burn attendance and even lessen provision of uncompensated care (Tynan et al.., 2009). It is evident that many physicians own these specialty hospitals or at least involved in their day to day operations. A study conducted by Tynan et al.(2009) revealed that most general hospitals experienced departure of health specialists in cardiology and orthopedic. Many are attracted by the larger share of profit due to their direct involvement in the management while others left to start their own special hospitals (Tynan et al., 2009). These led the federal government in enacting the laws that prohibit physicians in community hospitals from referring patients to facilities they financially own (Arbor, 2014). When physicians do self referrals, they are entitled to profits for the services they own and payment for their professional services (Arbor, 2014). However, some argue that it is through these referrals are they able to provide security to medical equipment while at the same time enhancing high quality accessible medical facilities including early diagnosis (Arbor, 2014). It is evident that the increase in specialty hospitals is as a result of the quality nature attendance and attention paid to patients with special cases, who with Medicare insurance are more than willing to pay to be well attended to as compared to the general hospitals. These conditions are such as cardiac, orthopedic or surgical procedures which need closer medical attention from the medical practitioners which is not readily available in general hospitals.

           To regulate the extend to which these private special facilities had a negative impact on the general community health facilities, the federal government had came up with regulations such as The Stark Law which prohibited physicians from referring patients with Medicare of Medicaid to health facilities in which they hard financial gains (Sujit, Niteesh & Brennan, 2005). This was later amended by Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 following a loophole in The Stark Law that did not exhaustively define what specialty hospitals were (Sujit et al., 2005). The amendment was to include new specialty hospitals for a period of eighteen months from eighth December 2003 to eighth June 2005 (Sujit et al., 2005).

         There have been attempts by different states in coming up with legislations that govern the medical practice such as the CON (State-of-Need) Laws (Sujit et al., 2005). This laws enacted in the late 1980s was in an attempt to address the rise of specialty hospitals, how they would be rationalized and regulated (Sujit et al.., 2005). However, half of the United States adheres to the CON Laws since their inception with a varying degree of interpretation. In some states, there has been violent opposition to the development of privately owned specialty health facilities providing orthopedic, surgery or cancer treatment facilities such as Florida (Sujit et al., 2005).

       In 2006, Senate Finance Committee Chairman Chuck Grassley had grilled centres for medicare aand medicaid services administrator Mark McClellan citing the move by his agency to have defied congressional intent while enforcing restricitons on speciality hospitals (Young, 2006). Grassley had indicated expressed his disatisfaction with the way the CMS, an agency mandated with the task of overseeing that no other new specialty hospitals were emerging (Young, 2005). Grassely had expressed the inadequency of CMS in dealing with privately owned medical facilities following the death of an 88 year old who had died at one of these facilities despite CMS being tasked with the mandate of stoping the formation of such specialty facilities privately or partially owned by physicians (Young, 2005). Grassley having noted the expiry of a eighteen month period moratorium ban on the formation of new specialty hospitals still expressed the possibility that CMS could have used its authority to extend the period (Young, 2006). It was also apparent that most of the physicians found loopholes within the regulations forbidding them from referring patients to specialty hospitals to which they had financial gain in to form new facilities (Young, 2006). McClellan while defending CMS had explained the it only had the right to decline the payment for services when a physician had referred a patient to a specialty hospital without following the right protocol (Young, 2006).

         MedPAC, after carrying out an emperical analysis on specialty hospitals, sought to extend the specialty hospital moratorium through ASHA’s ‘Truth’ campaign (Pyrek, 2005). MedPAC had recommended the need for the DRGs to change the payment method for the inpatient prospective payment system (IPPS) to fully consider the differences in the severity of illness among the inpatients based on the average cost of care provision as opposed to charges being based on the nations average hospitals’ relative values for each DRG (Pyrek, 2005). It would be more effective if the MedPAC enacted legislations that would allow the existence of specialty hospitals that are regularly under surveillance to provide special services in orthopedics and surgery cases whose interests do not conflict those of the board.


Arbor, A. (2013, July 21). Physician Ownership in Hospitals and Outpatient Facilities. Centre for

Healthcare, Research and Transformation. Retieved on April 18th, 2014 form http://www.chrt.org/public-policy/policy-papers/physician-ownership-in-hospitals-and-outpatient-facilities/

 Pyrek, M., K. (2005, May). MedPAC Recommends Extending Specialty Hospital Moratorium.

Surgistrategies. Retrieved on April 18th, 2014 from    

http://www.surgistrategies.com/articles/2005/05/medpac-recommends-extending-         specialty-hospital-mo.aspx

Sujit, C., Niteesh, K., C. & Brennan, A., T. (August 5, 2005). Specialty Versus Cummunity

 Hospitals: What Role For The Law? Health Affairs. Retrieved on April 18th, 2014 form


Tynan, A., November, A. E., Lauer, J., Pham, H. H. & Cram, P. (April 2009). General Hospitals,

 Specialty Hospitals and Financially Vulnerable Patients. HSC Research Brief No. 11. Retrieved on April 18th, 2014 from http://www.hschange.com/CONTENT/1056/?PRINT=1

Young, J.(2006, May 18). Grassley, Baucus chide CMS on Specialty hospitals. The Hill.

Retrieved on April 18th, 2014 from http://thehill.com/homenews/administration/4213-grassley-baucus-chide-cms-on-specialty-hospitals

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