[Congressional Record (Bound Edition), Volume 147 (2001), Part 9]
[Extensions of Remarks]
[Pages 13256-13257]
[From the U.S. Government Publishing Office, www.gpo.gov]



 MEDICARE PHYSICIAN SELF-REFERRAL--A BILL TO KEEP SPECIALTY HOSPITALS 
                  FROM SKIRTING THE INTENT OF THE LAW

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Thursday, July 12, 2001

  Mr. STARK. Mr. Speaker, Rep. Kleczka--who represents Milwaukee and 
serves with me on the Ways and Means Health Subcommittee--brought to my 
attention a report by the Milwaukee Journal Sentinel on Monday, June 
25, 2001, that two Milwaukee hospital groups are planning to open free-
standing heart hospitals. Both of these specialty hospitals will be 
jointly owned by the hospitals and the groups of physicians who will be 
referring patients to the facilities. The newspaper article pointed out 
the potential conflict-of-interest, and the resulting ethical concern, 
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.
  Mr. Speaker, the situation in Milwaukee is similar to other reports 
that hospitals and physicians are engaging in such clinical joint 
ventures, including both freestanding specialty

[[Page 13257]]

hospitals (e.g., heart, orthopedic, or maternity hospitals), and 
arrangements in which a high revenue generating unit or service (e.g., 
cardiology or cardiac surgery) of an existing hospital is restructured 
and legally incorporated as a separate hospital.
  Typically, these point ventures are marketed only to physicians in a 
position to refer patients to the facility, and they are structured to 
take advantage of a loophole in the Medicare physician self referral 
law permitting physician investments in ``whole hospitals''.
  Mr. Speaker, the development of specialty hospitals is of great 
concern 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 of full-scale hospitals, leaving them to 
struggle financially. Then the hospitals must look to Medicare and to 
their local communities to help them financially--and all because these 
joint ventures are skimming high profits for their investors, including 
physicians.
  Mr. Speaker, these situations not only harm hospitals, they violate 
the spirit of Medicare self-referral laws. Lawyers have found a 
loophole in the self-referral laws, and physicians are taking advantage 
of it.
  Today, Rep. Kleczka and I are joining together to introduce the 
Hospital Investment Act of 2001 to close the loophole. Our bill would 
continue to permit physician ownership in these joint ventures and 
specialty hospitals only if the ownership or investment interest is 
purchased on terms that are generally available to the public at the 
time. This amendment would not prohibit physicians from purchasing 
shares to stock, but it would make sure that such stock purchases are 
not the result of a sweetheart deal available only to physicians, but 
set up in a way to skirt the law. My amendment would make it harder for 
hospitals and physicians to skim profits from hospitals leaving the 
hospitals worse off financially.
  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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