1 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, Emergency Department Visits

Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, Number of Uninsured, 2000 – 2004, In Millions …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.

Private Payers Elective Cases Less Complex Surgical Care Well-funded Indigent Care 24/7 Capacity Unfunded Revenue from Service to Paying Patients Medicare and Medicaid Emergent Cases More Complex Medical Care Under- funded Disaster Readiness 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… Source: MedPAC, Healthcare Spending and the Medicare Program, June 2006 Number of Medicare-approved ASCs, Number of ASCs

…for well-insured patients… Percent of ASC Patients by Payer, 2005 Source: Medical Group Management Association (MGMA). Ambulatory Surgery Center Performance Survey Report.

…and the rapidly growing number of physician- owned limited service hospitals. Number of Physician-owned Limited-service Hospitals, 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

…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, Physician-owned

Instead these facilities cherry-pick the well- funded services… Well-funded services Physician-owned limited-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 for full-service hospitals

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.