Specialty Medical Center Study 81582 Mathematica 2/25/2019 6:27:22 AM2/25/2019 6:27:22 AM Specialty Medical Center Study Briefing to the Wyoming Health Care Commission November 20, 2006 Cheryl Fahlman, Ph.D Anthony

Outline Policy context and issues for Wyoming Objectives of this study Potential policy approaches for Wyoming Characteristics of market areas with medical specialty centers The financial performance of hospitals in Wyoming Stakeholder perceptions and recommendations

Policy Context What is a medical specialty center? Also known as niche or specialty hospitals No standard definition GAO (2003) approach using administrative data 2/3 of claims are in 1-2 major diagnostic categories (MDCs) or are in surgical diagnosis-related groups (DRGs)

Policy Context Types of Hospitals Types of owners Cardiac Orthopedic Surgical Women’s Health (excluding obstetrics) Types of owners General/community hospital Corporation Physicians Partnerships

Policy Context Issues Market competition Potentially effect on financial ability of community hospitals Conflict of Interest Self-referral Uncertain application of Stark laws prohibiting physician self-referral Uncompensated care/Medicaid patients Quality of Care

Issues for Wyoming Currently no medical specialty centers in Wyoming, National Surgical Hospitals Inc. broke ground in Casper for a MSC in November 2006 16 ambulatory surgery centers Medical specialty centers operate in neighboring states (NE, SD, ID)

Objectives of Study Better understanding of: Medical specialty center regulation in other states and at the Federal level Information about potential impacts of medical specialty centers on Wyoming’s healthcare delivery system Potential impact of medical specialty centers on the cost and quality of hospital services for Wyoming residents

Potential Policy Approaches Watchful Waiting Improving Community and Facility Monitoring through Data Collection Hospital financial and utilization data Trauma Registry Use information to inform policy Adjust licensing process Moratorium Ownership Disclosure CMS has recommended physician ownership disclosure to HHS Disclosure to patients

Potential Policy Approaches Self-referral Stark laws Wyoming has no laws governing self-referral Level Playing Field Patient mix Uncompensated care fund Emergency care obligations Certificate-of-need Wyoming repealed in the 1980s

Financial Performance of Hospitals in Wyoming 22 not-for-profit 3 for-profit 4 excluded Not-for-profit hospitals (2000 & 2004) Mean number of hospital beds slight decline from 52 to 50 beds Admissions per bed remained constant For-profit hospitals (2000 & 2004) Mean number of hospital beds remained constant at 59 beds Admissions per bed increased 14%

Financial Performance of Hospitals in Wyoming Percentage Change in Utilization Between 2000 and 2004 Not-for-profit Hospitals For-profit Hospitals All Hospitals Mean Hospital Admissions -0.2% 7.5% 0.8% Mean Outpatient Visits -7.5% 48.2% -2.4% Mean Emergency Dept Visits 5.2% 6.7% 5.0% Mean Total Surgeries 1.6% 30.0% Mean Outpatient Surgeries -5.0% 35.3% 0.1% Mean Inpatient Surgeries 1.2% 15.0% 2.8%

Financial Performance of Hospitals in Wyoming Average Payer Mix in Wyoming General Hospitals as a Percent of Total Patient Revenue, 2004

Financial Performance of Hospitals in Wyoming Little difference between not-for-profit and for-profit hospitals in uncompensated care provided Not-for-profit hospitals Mean operating margin operated in the red Mean total margins positive but lower than for-profit facilities For-profit hospitals Mean total margin and operating margin increased each year

Methodology Research question Data Sources: What are market characteristics lead a MSC to open? Data Sources: CMS (2006) report identified market areas with MSC U.S. Census Bureau Area Resource File (ARF) Wyoming Hospital Association (WHA) annual survey American Hospital Association (AHA) annual survey

Methodology Analyzed likelihood of MSC in a given market as a function of the area’s demographic and other market characteristics In the comparison states, we used HSAs with medical specialty centers present and the MSCs reported into the AHA annual survey Comparison States: Texas, South Dakota, Idaho, Montana, Nebraska, Utah, and Colorado Market areas defined by hospital service areas (HSAs)

Characteristics of Market Areas With MSCs Findings Higher probability Total population size in the area Number of for-profit hospitals in the area Higher per capita income levels Lower probability Higher proportion of non-white population Percent of the population who completed high school Implications for Wyoming If MSCs were to emerge, most likely in areas with at least 50,000 people

Stakeholder Perceptions Who Representatives from General hospitals Medical specialty centers Emergency medical services Local health departments Health insurers Physician specialty groups Health centers Health care advocacy groups Where Casper Cheyenne Rock Springs area Gillette area

Stakeholder Perceptions Impetus for Development Physician dissatisfaction with management of general hospitals Quality of care Efficiency of specialization Financial gain for physician owners

Stakeholder Perceptions How would you describe the nature of competition in your market? Physician recruitment Salary for emergency on-call General-hospital joint ventures to retain business Physician owned outside facilities

Stakeholder Perceptions How are the relationships between physicians, hospitals and insurers? Hospital: Tensions will magnify Lure lucrative patients away Lure needed staff Insurers: “Any willing provider” state Currently monopolistic pricing so MSC may introduce bargaining Need to understand the total impact on general hospitals

Stakeholder Perceptions What do you think the impact of MSCs will be? Financial impact on general hospitals Worry about declining revenues and reduced insured patient volume Worry about losing Medicare sole community provider status Some competition seen as “not bad” but “level playing field” Cost of Health Care Already a high-cost health care market Change unit prices Create efficiencies

Stakeholder Perceptions What do you think the impact of MSCs will be? Health Care Quality High quality care already an important part of hospital mission MSCs could improve quality for patients Increased cost potentially strain current quality initiatives Access to Care Not significantly improve access except for reducing wait times for elective surgery May help stem out-migration of patients Concern about uninsured and low-income General concern about access to primary care physicians

Stakeholder Recommendations No restrictions A process to address potential excess capacity Level playing field MSCs accept a certain number or percentage of uninsured/Medicaid patients Expand Stark laws Subsidize indigent care Mixed views on mandatory emergency department