[Congressional Record (Bound Edition), Volume 149 (2003), Part 6]
[Extensions of Remarks]
[Pages 8053-8054]
[From the U.S. Government Publishing Office, www.gpo.gov]




      CLOSE THE LOOPHOLE IN MEDICARE PHYSICIAN SELF-REFERRAL LAWS

                                 ______
                                 

                         HON. GERALD D. KLECZKA

                              of wisconsin

                    in the house of representatives

                         Tuesday, April 1, 2003

  Mr. KLECZKA. Mr. Speaker, today Congressman Stark and I are 
reintroducing legislation, the Hospital Investment Act, sponsored 
initially in the 107th Congress, to address serious concerns about 
conflicts-of-interest raised by specialty or so-called ``boutique'' 
hospitals with physician-investor ownership arrangements.
  Across the nation, there is a tremendous growth of boutique hospital 
construction. In the Milwaukee-area alone, there are three boutique 
heart hospitals under development. These facilities are not typical, 
general hospitals, which are prepared to meet the wide variety of 
health needs within a community. Instead, these entities specialize in 
one area of procedures, such as cardiac care or orthopedic surgery, 
that is high-volume and high-profit to these investor-owned facilities.
  One major consideration with the proliferation of these boutique 
hospitals is the issue of self-referral, in which doctors send their 
patients to facilities where they have a preferential financial 
ownership stake. Current federal law forbids a physician from referring 
patients to health facilities--such as clinical laboratories, physical 
therapy groups, and radiology centers--in which he or she stands to 
financially benefit.
  These Stark I and Stark II laws did provide one exception that allows 
physicians to self-refer patients to hospitals, as long as it is a 
``whole hospital'' and not just a particular department or clinic 
within the facility. Since whole hospitals provide such a wide array of 
health services, there was minimal risk of conflict-of-interest. 
Unfortunately, this exception

[[Page 8054]]

has become a loophole by which physicians can legally refer patients to 
freestanding boutique hospitals where they have a direct personal 
financial interest.
  Typically, stakes in these boutique hospital ventures are marketed 
exclusively to doctors in a position to refer patients to the facility. 
This preferential interest creates an inducement for investor-
physicians to overutilize services and base treatment decisions on 
profits rather than the medical needs of the patient. As we have seen 
in the past, these arrangements invariably lead to increased health 
care spending without necessarily increased quality of patient care. 
This is exactly the scenario that the Stark laws were designed to 
prevent.
  Boutique hospitals also rob full-service community hospitals of their 
most profitable lines of business, leaving them to struggle to stay 
afloat financially. Without the high-profit surgical units to cross-
subsidize the other less-profitable--but equally important--services 
like emergency and burn care, these hospitals will have to turn 
increasingly to the federal government as well as their local 
communities for financial assistance. Medicare, Medicaid, and other 
important programs, which are already stretched thin, should not be 
forced to take on this additional burden because these joint ventures 
are skimming off large profits for their investors.
  The Hospital Investment Act of 2003 would close this loophole by 
prohibiting preferential hospital ownership terms for physicians. Under 
this legislation, physicians could continue to refer patients to joint 
ventures and specialty hospitals, but only if their ownership or 
investment interest is purchased on terms also available to the general 
public at the time. This would ensure that stock purchases are not a 
result of a special deal available only to physicians that gives them a 
preferential share of the profits.
  Physicians and facilities found in violation of this act would be 
subject to a civil monetary penalty of up to $15,000 per prohibited 
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, we must close the loophole in the Medicare physician 
self-referral laws and halt this trend that threatens the 
sustainability of our local community hospitals. I urge my colleagues 
to cosponsor and support this important legislation.

                          ____________________