The Transformation of American Healthcare is at Hand

Healthcare in America is entering a transformative stage. The reform effort seeks to improve access to healthcare, address the problem of the uninsured and lower costs. Why is it, then, that some want to restrict American healthcare consumers from having access to high quality care that is efficient, convenient to consumers and lowers costs?

That is exactly what opponents to physician-owned hospitals want to do, and will succeed in doing, if they are able to restrict physician ownership of hospitals. The tax-exempt hospital lobby and the majority of its members would like to snuff out physician ownership of hospitals to preserve their business model. Ending physician ownership of hospitals means the tax-exempt hospital industry would have a monopoly in healthcare. How does that help patients and reform healthcare?

I want healthcare to be more efficient, more patient-focused, less expensive and with fewer complications — things monopolies rarely deliver. I want for all Americans to have what we have in physician-owned hospitals: Excellent care delivered efficiently in an environment where the patient and their experience come first. Physician-owned hospitals are doing this now, across the country. We can help transform American healthcare because we have already been doing so, and as a result we’re improving patient outcomes.

We see it at my hospital, the Indiana Orthopaedic Hospital in Indianapolis. In the 2009 HealthGrades report, we received five-star ratings in our orthopedic specialties and were recognized as among the top 5 percent of joint replacement hospitals in the country. We have done nearly 40,000 orthopedic and spine cases since we opened in March 2005. We focus on patients and their families, identify problems that need to be corrected and strive toward improved patient outcomes.

Yet every imaginable argument has been used to justify closing perfectly good hospitals. We are told that doctors would overutilize services, “cherry pick” the best cases for financial profit, doctors are greedy and don’t provide charity care. These allegations are false; public and private studies confirm this.

No physician true to his oath and his patients’ interests would perform unnecessary procedures or knowingly order unnecessary tests. The Woods 2005 study of a group of orthopedic surgeon-owners found that neither annual patient volume nor the percentage of patients who had surgery changed significantly after the surgeons opened their specialty hospital. Following a review, the Congressional Budget Office reported to Congress in December 2007 it was unaware of any evidence proving this allegation.

Our review at my hospital showed the ratio of surgeries to new patient visits with our physician-owners actually went down slightly after our hospital opened.

Most physicians who start specialty hospitals do so to improve their patient outcomes. Opponents of physician hospitals continue to allege that physicians start hospitals primarily for financial gain. The Medicare Payment Advisory Commission (MedPAC) examined this and reported to Congress in 2005 that the vast majority of physicians who started specialty hospitals did so to take greater control of patient care and reduce hospital bureaucracy.

We started the Indiana Orthopaedic Hospital because we saw a stark contrast between the efficiency in the major not-for-tax hospitals where we worked and what we experienced in our orthopedic practice. We have improved the patient experience overall, improved patient outcomes and reduced bureaucracy.

“Cherry picking” alleges physicians self-refer the most lucrative of cases and best insured patients to the hospital they own for financial gain. This supposedly leaves the not-for-tax community hospitals to treat the sickest and poorest patients who are unable to pay their bills. The Centers for Medicare and Medicaid Services (CMS) study in 2005 looked at this issue with a study of cardiac specialty hospitals and found no support of the allegation. Besides, CMS has changed the reimbursement rules, reimbursing hospitals based on the severity of a patient’s condition, so no incentive exists to “cherry pick” anyway. Hospitals get paid more for more severe cases, regardless of who owns them or whether they pay taxes.

Not-for-tax community hospitals are made tax-exempt because they are legally required to treat anyone who comes in. Opponents of physician ownership suggest the tax-exempt community hospitals are threatened by the competition from physician-owned, for-profit hospitals. Not one community hospital has closed as a result of competing with a physician owned hospital.

Interestingly, the American Hospital Association reported that the tax-exempt community hospitals had record profits of $43 billion in 2007. The Internal Revenue Service reported in July 2007 that nearly 50 percent of tax-exempt hospitals spent less than 5 percent of total revenue on charity care, and the new IRS report on the tax-exempt hospitals calls into question whether their level of charity care justifies the tax-exemption. Nobody seems to mention whose hands provide that charity care the not-for-tax hospitals tout. It is the doctors themselves. And we are just as willing to do charity care in a hospital we own.

Physicians provide charity care in our own hospitals just like we do in the tax-exempt hospitals. Our hospital has a program specifically designed for the indigent that provides meaningful assistance to those in need. And, physician hospitals pay taxes that provide police, firefighters, schools, roads and parks in our communities.

Most importantly, public and private studies show that physician-owned hospitals provide superior care. The Department of Health and Human Services’ 2005 study documented that patients gave higher satisfaction rates to physician hospitals, liked the service and the amenities found in physician hospitals. The CMS 2005 study showed that specialty and physician hospitals provided lower patient-to-nurse ratios, averaging 4-to-1, compared to the nonprofit community hospitals that averaged around 8-to-1 or more. A University of Iowa study of hip replacements in Medicare patients showed a 50 percent reduction in complications at orthopedic specialty hospitals like ours. Recently, The Hospital Review listed 15 great hospitals for orthopedic and spine surgery, four of which are physician owned.

The coming debate on healthcare reform may determine how healthcare is delivered in this country for generations to come. That’s transformative, but what is our healthcare system to become? Will healthcare reform bring improved patient outcomes, cost savings, lower complication rates, lower infection rates, less bureaucracy and greater efficiency? Or will we codify and cement into place the inefficient, bureaucratic and slow-to-respond system we have now? The choice is ours. We have a unique opportunity to be innovative and create the healthcare system that we dream of and aspire to. Will we dare to do it? Will we truly transform American healthcare and as a result, improve the well-being and outcomes for the millions of Americans who enter the healthcare system?

John W. Dietz Jr., MD, is chairman of the board of directors at the Indiana Orthopaedic Hospital in Indianapolis. A graduate of the United States Military Academy at West Point, Dietz received his medical degree from the Duke University School of Medicine in 1984. He has authored many articles published in medical journals and presented at numerous national meetings of orthopedic surgeons. A member of the American Academy of Orthopaedic Surgeons and the North American Spine Society, he is a Fellow of the Scoliosis Research Society. Dietz is an inventor and has been awarded patents on surgical instruments used in endoscopic spine surgery.