11

Prepared to Care:

Limited-service Providers Put at Risk the Standby Role of Hospitals

Americans rely heavily on the “standby” role of full-service hospitals.

The Standby Role:

• 24/7 access to care

• Caring for all patients regardless of ability to pay

• Disaster readiness and response

Emergency Department Visits ,1997 – 2004, In Millions

Source: AHA Annual Survey, data for community hospitals.

The demand for emergency access to care is rising...

Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006.

92.8 94.899.5 103.1 106.0 110.0 111.0 112.6

0

20

40

60

80

100

120

1997 1998 1999 2000 2001 2002 2003 2004

Em

erg

ency

D

epar

tmen

t V

isit

s

Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006.

Number of Uninsured, 2000 – 2004, In Millions

39.8

45.0 45.843.6

41.2

2000 2001 2002 2003 2004

…full-service hospitals provide a medical safety net for the growing number of uninsured…

…and full-service hospitals stand ready to respond to a wide range of disasters.

Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006.

PrivatePayers

ElectiveCases

LessComplex

SurgicalCare

Well-funded

IndigentCare

24/7 CapacityUnfunded

Revenue from Service to Paying Patients

Medicareand

Medicaid

EmergentCases

MoreComplex

MedicalCare

Under-funded

DisasterReadiness

Despite its importance, however, the “standby” role is not explicitly funded.

Care is shifting to the rapidly growing number of providers who do not play this role.

The bulk of these facilities involve physician ownership and self-referral.

These include ambulatory surgery centers that focus on elective outpatient procedures…

4506

24622644

27863028

33713597

38874136

0

1000

2000

3000

4000

5000

1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: MedPAC, Healthcare Spending and the Medicare Program, June 2006

Number of Medicare-approved ASCs, 1997 - 2004

Nu

mb

er o

f A

SC

s

…for well-insured patients…

Other Federal Payers2.5%

Self-Pay3.0%

Workers' Compensation5.8%

Medicare30.9%

Commercial54.0%

Charity care0.3%

Medicaid3.5%

Percent of ASC Patients by Payer, 2005

Source: Medical Group Management Association (MGMA). Ambulatory Surgery Center Performance Survey. 2005 Report.

…and the rapidly growing number of physician-owned limited service hospitals.

4049

65

89

112

130

0

25

50

75

100

125

150

2000 2001 2002 2003 2004 2005

Number of Physician-owned Limited-service Hospitals, 2000 - 2005

Source: The Centers for Medicare & Medicaid Services

Physician-owned limited-service hospitals typically do not provide 24/7 access to care…Percent of Hospitals with an Emergency Department*, Physician-owned Limited-service Hospitals versus All Community Hospitals, 2003

*Hospitals treating more than 5% of cases in emergency department.

Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006

91%

21%

Physician-owned Limited-serviceHospitals*

All Community Hospitals

…nor serve as the medical safety-net for low income populations.

Medicaid as a Percent of All Patient Discharges, 2002

Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006.

15%

1%

4%

Heart Hospitals Orthopedic Hospitals Community Hospitals

Physician-owned

Instead these facilities cherry-pick the well-funded services…

Well-funded services

Physician-ownedlimited-service

hospitals

…relying on the economically motivated referral decisions of physician-owners…

• Behaviors associated with self-referral have been well-documented, including:• Patient steering (physician-owners direct their patients to

their own facilities).• Cherry-picking:

• Offering well-reimbursed services• Selecting healthier patients• Avoiding low-income patients

• Increased utilization

…and leaving full-service hospitals without the means to subsidize the standby role.

Unfunded and under-funded

services

Left forfull-servicehospitals

Physician-owned limited-service facilities threaten the stability of the system.

Solution

• Ban self-referral to new limited-service hospitals.• Payment systems must recognize the “standby” role of

hospitals. • Facilities that serve the standby role must get reimbursed for

their added costs.• The types of payment changes proposed by CMS to date do

not address this issue.

• Facilities that do not offer the standby role must support it.• Care standards for meeting emergency patient needs for

facilities without emergency departments.• Support of physician on-call coverage.