[Congressional Record Volume 147, Number 97 (Thursday, July 12, 2001)]
[Extensions of Remarks]
[Page E1322]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    HOSPITAL INVESTMENT ACT OF 2001

                                 ______
                                 

                         HON. GERALD D. KLECZKA

                              of wisconsin

                    in the house of representatives

                        Thursday, July 12, 2001

  Mr. KLECZKA. Mr. Speaker, today Mr. Stark from California and I are 
introducing the Hospital Investment Act of 2001, which aims to address 
concerns regarding potential conflicts of interest raised by the advent 
of free-standing specialty or ``boutique'' hospitals with joint 
investor-physician ownership arrangements.
  Over the past several years, we have seen a growing expansion of 
these ``boutique'' hospitals. Each of these hospitals specializes in 
one particular area of inpatient procedures--such as heart, orthopedic, 
or maternity--which is high-volume, high-cost, and high-profit to these 
new for-profit institutions.
  Among the many problems associated with these boutique hospitals is 
the issue of self-referrals, where physicians refer their patients to a 
hospital in which they have a preferential ownership stake.
  Under current federal law, a doctor may not refer his patients to a 
health care facility in which he has a financial interest. This 
includes clinical laboratory services, physical therapy, speech 
pathology, radiology services (such as MRIs, CAT scans, and ultrasound) 
and other auxiliary health services. Before these laws, commonly 
referred to as Stark I and Stark II, were passed in 1989 and 1993 
respectively, the HHS Inspector General had discovered that Medicare 
patients received 45 percent more laboratory services when the doctor 
owned the lab than when the doctor did not.
  One exception to the Stark laws allows a physician to refer patients 
to a hospital in which he or she has a financial interest, as long as 
that interest is in the whole hospital and not just a particular 
department or clinic within. With the proliferation of specialty 
hospitals, this exception has become a loophole by which physicians can 
legally refer patients to a boutique hospital in which they have a 
direct personal financial interest.
  This preferential ownership provides physicians with increased 
financial incentives to engage in the very type of overutilization of 
medical services that the HHS Office of the Inspector General disclosed 
in its 1989 report, which invariably leads to increased federal 
Medicare and Medicaid spending without increased quality of patient 
care. This, as we all know, is the scenario that the Stark laws were 
designed to prevent in the first place.
  The bill we are introducing today, the Hospital Investment Act of 
2001, would address this problem by tightening the current law to 
prohibit preferential hospital ownership terms for physicians who wish 
to be able to refer patients to the facility. Under this legislation, 
physicians would be allowed to refer patients to a hospital in which 
they had an ownership interest, but only if the interest was purchased 
on terms also available to the general public.
  Physicians and facilities that violate this new law would be subject 
to a civil monetary penalty of up to $15,000 per referral plus twice 
the amount billed for the referred service. In cases where there was an 
arrangement or scheme to refer patients to facilities owned by the 
physician, penalties could be as high as $100,000 and twice the amount 
billed for referred services. Also, the physician and specialty 
hospital would be denied participation in the Medicare program.
  Mr. Speaker, it is imperative that Congress closes the hospital 
ownership loophole in the Medicare physician self-referral laws to 
ensure our nation's health care system is not compromised and to 
protect the viability of our nation's Medicare and Medicaid programs. I 
urge my colleagues to cosponsor and support this important legislation.

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