The future of physician-owned or joint-ventured heart hospitals would seem to be dead. What officially killed it is H.R. 3950, the Patient Protection & Affordable Care Act, which declares that, unless they have a provider agreement in place prior to December 31, 2010, physician-owned hospitals (of any type) are excluded from Medicare participation.
These controversial entities have suffered as of late from a confluence of market forces that did not bode well for the long-term health of the heart hospital. In particular, two major factors worked against them:
Thus, freestanding, for-profit heart hospitals began to lose their novelty and market luster. Even MedCath, the proprietary developer of heart hospitals, is divesting some properties and looking to sell itself or more of its hospitals. It recently sold its ownership stake in the Heart Hospital of Austin (Texas) to St. David's Medical Center of Austin.
On June 3, Physician Hospitals of America, representing 260 physician-owned hospitals, along with the Texas Spine & Joint Hospital filed suit in U.S. Federal Court challenging the constitutionality of Section 6001 of the new law. They denounce the passage of healthcare reform, saying it will destroy the 60 hospitals currently under development, cost 25,000 jobs in 38 states, and cost billions of dollars in invested costs. This time, politics, and of course, supporting market trends, seem to have won out over entrepreneurship and the free market. Unless, that is, that section of the law is overturned in court!
The overall strategic, competitive and financial value of the freestanding heart hospital concept has been debated time and again over the past several years, with full-service hospitals out to kill it, and our purpose is not to rehash this debate here. It would seem then, that the following conclusions can be drawn from a distillation of current trends and recent legislation:
If there is a lesson here, it is that even in a market-driven economy such as healthcare, politics cannot be divorced from economics and market trends must be continuously and critically evaluated by all providers if they are to succeed and prosper.
What do you think? As always, CFA values your thoughts and comments.