[Congressional Record Volume 149, Number 52 (Tuesday, April 1, 2003)]
[Extensions of Remarks]
[Pages E634-E635]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              INTRODUCTION OF THE HOSPITAL INVESTMENT ACT

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, April 1, 2003

  Mr. STARK. Mr. Speaker, Representative Jerry Kleczka (who represents 
Milwaukee, WI and serves with me on the Ways and Means Health 
Subcommittee) and I share a strong concern about the growth of so-
called ``boutique'' or ``specialty'' hospitals. These entities are 
springing up across the country, including across California and in 
Milwaukee, Wisconsin. They are licensed under state law as hospitals, 
but instead of providing the wide array of services that traditional 
hospitals provide, they focus on a particular procedure or medical 
specialty. The medical specialties that are being chosen aren't the 
vital day-to-day hospital services on which communities depend like 
emergency rooms and burn units. Instead, they are the highly profitable 
segments of care--cardiac care and orthopedic surgery being two of the 
most common types of specialty hospitals.
  Today, we are reintroducing a bill we first authored in the 107th 
Congress, the Hospital Investment Act. This bill addresses our concern 
that these specialty hospitals are skirting the spirit of the physician 
self referral laws, often called the Stark laws. Those laws allow 
physicians to invest in ``whole hospitals'' because the services 
provided in such a facility

[[Page E635]]

are so broad that concerns about self referral conflicts are greatly 
minimized. But that is not the case for specialty hospitals.
  Most specialty hospitals are jointly owned by the hospitals and 
groups of physicians who are referring patients to that hospital. 
Typically, these joint ventures are marketed only to physicians in a 
position to refer patients to the facility. In these situations, there 
is great potential for conflicts-of-interest for physicians who refer 
patients to facilities in which they have an ownership interest. These 
joint ventures may induce investor physicians to base their treatment 
decisions on profits generated by the facility rather than on the 
clinical needs of their patients. This is exactly the type of behavior 
the Stark laws were written to prevent.
  The development of specialty hospitals is of great concern to our 
health care system and to communities across our nation because they 
deprive full-scale hospitals of their most profitable business, leaving 
those existing hospitals much worse off financially. The investors in 
these joint ventures and specialty hospitals skim the profits off full-
scale hospitals, leaving them to struggle financially. Then the 
hospitals must look to Medicare and to their local communities to help 
them financially.
  One of the biggest chains of heart hospitals in this country is a 
company called the MedCath Corporation. One needs only look at their 
financial statement to see that they recognize the level of concern 
felt around the nation about their line of business. Their 2002 10-K 
report highlights nervousness that regulators and legislators are 
catching onto their scheme. As the report states:

  ``Many states in which we operate also have adopted, or are 
considering adopting physician self-referral laws which may prohibit 
certain physician referrals or require certain disclosures.'' They also 
highlight specific concerns about our bill from the last Congress and 
go on to say that, ``Possible amendments to the Stark law could require 
us to change the manner in which we establish relationships with 
physicians to develop a heart hospital.''
  MedCath is right to be nervous. Their business model not only harms 
hospitals and communities, it violates the spirit of Medicare self 
referral laws intended to prohibit such conflicted behavior that drives 
up costs and may produce unnecessary care. Lawyers for MedCath and many 
others have found a loophole in the self-referral laws, and physicians 
are taking advantage of it.
  The bill we are introducing today would close that loophole. Our bill 
would continue to permit physician ownership in these joint ventures 
and specialty hospitals. But, that allowance is contingent on a new 
requirement that the ownership or investment interest is purchased on 
terms that are generally available to the public at the time. This 
change would not prohibit physicians from purchasing shares of stock. 
However, it would make sure that such stock purchases are not the 
result of a sweetheart deal available only to physicians and set up in 
a way to skirt the law.
  If this bill is enacted, it will make it harder for specialty 
hospitals and physicians to skim profits from full-scale hospitals 
leaving it up to Medicare and local communities to foot the bill to 
assure that access to needed patient care isn't jeopardized.
  Mr. Speaker, it is time to close this loophole in the Medicare 
physician self-referral laws, and I urge my colleagues to support it.

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