| May 31, 2010

Oklahoma City Hospital One of Obamacare’s First Victims

Physicians at McBride Orthopedic Hospital had ambitious plans for their Oklahoma City hospital before Obamacare. Two new operating rooms and a four-bed intensive-care unit were part of a multimillion-dollar expansion project that promised to bring competition and more health care choices to the community.

But once President Obama’s signature was dry on the 2,409-page Patient Protection and Affordable Care Act, so, too, ended the McBride project. The recently enacted law imposed a series of new federal regulations on physician-owned hospitals, including an immediate ban on expansion.

“We pulled the plug when the law was signed,” McBride chief executive Mark Galliart said. “We were ready to break ground. We had everything approved by the state. We had the construction agreement in place. We were going to meet our timeline until the legislation passed.”

Within days of enactment of the new law, developers across the country nixed plans for 24 new physician-owned hospitals under construction. It will be a struggle for an additional 47 new such hospitals under construction to meet an Obamacare-imposed deadline of December 31 to be finished and have their Medicare certification.

Galliart is now preparing McBride for other onerous requirements imposed by Obamacare on the nation’s 260 physician-owned hospitals. In addition to limits on expansion and new construction, the law restricts new investments, requires new annual reports to the government, and sets fines for hospitals that fail to abide by transparency rules.

Imagine if the government owned General Motors and the Congress passed a bill that barred Ford from producing “any new cars and couldn’t expand on its existing cars,” Galliart said. “What other industry would put up with this? If we were spending money recklessly and harming people, that’s one thing. But physician-owned hospitals are doing it better and more efficiently.”

How did this happen?

The new regulations imposed on physician-owned hospitals can be traced to strong opposition from competing community hospitals and their lobbyists in Washington, D.C. The American Hospital Association and its affiliates spent more than $18 million on lobbying in 2009; the Federation of American Hospitals added nearly $4 million. In contrast, Physician Hospitals of America spent a grand total of $300,000.

With the cards stacked against them in Congress, many new hospitals are rushing to complete construction to secure their Medicare certification by December 31. Those that are already in operation are dispirited about future expansion but remain committed to their mission.

“Our goal is to serve the people sitting in the big hospitals with more dignity and respect—and to get them prompt care,” said Dr. Yasin Kahn, chief executive of Westfield Hospital in Allentown, Pa.

Kahn rebutted claims from the American Hospital Association that physician-owned hospitals cherry-pick the most profitable patients. More than 90 percent of the patients at Westfield Hospital aren’t affiliated with the hospital’s partners. His hospital takes pride in a lower nurse-to-patient ratio than the community hospital and an efficient emergency room with a 15-minute wait.

“This bill basically kills the entrepreneurship and competitive spirit of physician-owned hospitals,” Kahn said. “How do we serve all the people they’re planning to bring in if we can’t expand? Are they going to overburden the local community hospitals?”

The American Hospital Association maintains that the 5,000 community hospitals it represents will be able to care for the additional Americans who will be covered under Obamacare. Ellen Pryga, director of policy, defended the new regulations on physician-owned hospitals as necessary to streamline patient care and avoid conflicts of interest on patient referrals.

“When physicians control where their patients go, it’s a competitive advantage for physician owners,” Pryga said. “They can direct patients on a whole variety of factors, some of which are going to be the patients’ needs and others of which are going to be in the physicians’ financial interest.”

Such assertions keep Molly Sandvig, executive director of Physician Hospitals of America, on her toes. She tracks developments at the 260 physician-owned hospitals and others under construction.

“At a time when we should be looking for additional ways to provide more access, this is going to have the opposite effect,” Sandvig said of Obamacare. “New hospitals that were under development are not going forward right now. That hurts the patient by limiting access to high-quality care. It hurts communities where these hospitals were going to be built, and it hurts the health care market by putting thousands of jobs at risk.”

Sandvig estimated 25,000 jobs are at risk in 37 states. Shovel-ready construction jobs for new and expanding hospitals will also evaporate, as will physicians’ ability to rescue inner-city hospitals and build in rural communities.

Robert Bluey is director of the Center for Media and Public Policy at the Heritage Foundation.

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