Evolution of the American Hospital System
Subspecialization and Physician Ownership
There is a suggestion in health care today that the nonprofit acute-care hospital has outlived its usefulness—that its days are numbered. Such hospitals are, in fact, anachronisms—a relic of another era. Their replacement? New, single-specialty, investor-owned hospitals or surgery centers, many of which are at least in part owned by physicians who can refer their own patients to these facilities. The argument in favor of these facilities is that they are more responsive to physicians’ needs, that they offer a quality service, and that they can be easier to navigate for the average patient. Actually, I would not even argue against those points.
As such, they represent a powerful competitive force. And what is wrong with competition? After all, has not our free-market competitive system fostered all that we hold dear?
We do know that free markets are awfully good at establishing winners and losers. But free markets are terrible at allocating social responsibility. This is where the focus should be for those who are concerned about how the least among us are treated or about how we provide those services for which there is no market incentive.
There is a reason that the free market builds heart centers and not burn centers. The fact is that burns are costly to care for, tend to happen to that part of the population without health insurance, and thus, constitute a very low-margin business, at best.
So, what is wrong with physicians owning businesses to which they can refer patients? These physicians believe that not only is their investment good business, but that in many cases they are responding to shortcomings they perceive in general acute-care hospital service levels. We know that physicians are among the best and brightest and are vitally interested in their patients’ welfare.
Having said that, is there a possible conflict of interest when physicians recommend a service in which they have a financial stake? Probably not consciously. But to believe there is absolutely none is to believe that physicians are exempt from the same frailties from which the rest of mankind suffers.
If these new enterprises are the powerful competitors that they claim, and if they are quicker, better, and cheaper than general acute-care hospitals, then certainly private capital will recognize that and will flow in accordingly. So, too, physicians could admit or not, according to their independent view of what was solely in the best interest of their patient.
If, on the other hand, the business case for these entities is based solely on a conflict of interest that exists, then perhaps the public ought to at least be aware of the conflict.
Today, if a hospital executive uses financial incentives to entice a physician to use his or her hospital, they both go directly to jail. In fact, in a recent case involving financial rewards to physicians for hospital admissions, the judge’s instructions to the jury were to the effect that if they found any part of the reward system to be an inducement to use the hospital, they must convict. That administrator is now serving time in a federal penitentiary.
Therefore, please explain to me the difference between that legal precedent and the practice of allowing physicians to reward themselves for admitting patients to their own hospitals. If incentives are illegal conflicts of interest, does the source of those payments really matter?
We must also look at the impact of surgery centers and niche hospitals on the trauma system. The concern is that as certain specialties become more focused on their own centers, they are less inclined to cover hospital emergency rooms, where the bulk of the trauma appears and where the uninsured converge because there is nowhere else to go.
If we follow this trend to its logical conclusion, then ultimately the general acute-care hospital is stripped of all its resources and its ability to deliver those services for which there is no free market but which the community desperately needs. This, frankly, is not just a hospital problem; it is a physician problem, and it is a societal problem. Simply stating “this is not our responsibility” is not good enough.
After all, what do we all—whether rich or poor, physician or layperson—want from our trauma system when our loved one is injured on the interstate? What we want is a fully functioning emergency room that has the equipment, technology, and personnel (including specialty physicians) to address our total needs. Nothing less is sufficient.
That is what is at stake. That is what the general acute-care hospital does, and this is what is in danger. The community hospital delivers these and other needed services, even to the least among us. What they must not focus on is whether or not these new entities should or must exist. This would be a specious agreement—interesting in debate but of little value in solving the problem. This is their challenge. This is our collective opportunity.
If nonprofit acute-care hospitals are anachronisms, then all of us also must answer how we can provide these needed services.
The opinions expressed in this article are not necessarily those of the editors or of the American Heart Association.