The Washington Legislatures approval last month of a licensing measure that likely will discourage, if not prohibit, the opening of specialty hospitals in the state is drawing differing reactions from hospital executives and physicians here.


The measure, Senate Bill 5398, of which freshman Sen. Chris Marr, D-Spokane, was the prime sponsor, was signed by Gov. Chris Gregoire on April 18 after passing the Senate and House of Representatives by votes of 42-2 and 66-31, respectively.


All five Democrats and four of the 10 Republican legislators from the Spokane areas 3rd, 4th, 6th, 7th, and 9th legislative districts voted to approve the bill, which becomes law on July 22.


Im absolutely delighted by the bills passage, says Skip Davis, CEO of the Spokane-based Providence Health Care network, which includes Sacred Heart Medical Center, Holy Family Hospital, and several rural hospitals.


Dr. Brian J. Seppi, president of the 1,000-member Spokane County Medical Society, says he thinks many physicians here probably are disappointed by it. But he adds, I think it does open up some areas of collaborations with hospitals, possibly including doctor-owned specialty hospitals within general hospitals.


The legislation will require specialty hospitals, which focus in areas such as cardiac care or orthopedics or on doing surgeries, to provide certain services that general hospitals must provide, such as charity care and 24-hour emergency care. It mandates, for example, that they treat the same percentage of Medicaid, Medicare, and charity-care patients as does the competing general hospital with the lowest percentage of those patients.


Also, it requires that they arrange for the transfer of patients needing emergency services provided by general hospitals, accept general-hospital patients who need the special treatment that they can provide, and disclose the financial interests of their physician-owners.


The licensing requirements wont apply to hospitals that provide psychiatric, pediatric, oncology, or long-term acute care or rehabilitative services.


No specialty hospitals of the type targeted by the legislation currently operate in the state, but theres one just across the Idaho border in Post Falls, called Northwest Specialty Hospital, that competes with Spokane hospitals for some patients.


Nationally, about 140 specialty hospitals are in operation, and their growing numbers have prompted strong debate. Organizations representing general hospitals contend that specialty hospitals pose a financial threat by skimming revenue that general hospitals rely on from lucrative areas of care to offset money-losing services they provide.


They say, for example, that specialty hospitals usually dont have emergency departments, which means they provide little or no access to care for patients who are low income, uninsured, or indigent. Also, they question whether specialty hospitals are equipped to deal with patient emergencies that might arise, and they contend that ownership of specialty hospitals by doctors creates a conflict of interest, since the doctors can profit by directing patients to hospitals they own.


Argument for competition


Organizations representing doctors acknowledge both the financial burden that general hospitals bear in treating indigent and underinsured patients, and the critical roles they play in their communities. They argue, though, that patients shouldnt be deprived of competitive alternatives, and they contend theres no evidence showing that general hospitals have been harmed financially by specialty hospitals in regions where they compete.


The rise of specialty hospitals is at least partly an outgrowth of the insurance reimbursement pinch that many doctors are experiencing, which has caused them to look increasingly to other potential revenue sources, industry representatives here say.


Davis says the specialty hospital in Post Falls doesnt have a profound effect on Sacred Heart, but adds, My frustration with these is this continual fragmentation of the medical system. As you bifurcate these systems and sort of peel off paying patients basically youve taken any of the important income stream out of the hospital.


Without the newly passed law, Davis says, Were not on a level playing field.


Noting that general hospitals here provided tens of millions of dollars worth of care last year for which they werent paid, he says, We cant keep taking the preferred patients (out of them) and really not marginalize our capacity to fulfill a community responsibility.


Compared with an outright ban of specialty hospitals, the new law that puts requirements on them comparable to what general hospitals face is a good step to try to keep (their possible emergence here) contained in a responsible way, he says.


Jeff A. Nelson, CEO of Empire Health Services, Spokanes second-largest hospital network, says, Its really about patient safetymaking sure that we have the standards of care consistently across the boundaries within the hospital setting. Thats why we supported the bill. Its always a question of what happens to patients. We think this is what is best for the citizens of Spokane.


Also, he says, Theres costs associated with having the (general) hospital be the safe zone, in terms of community perception and the ability to provide a broad range of health services, and we want to make sure those safe zones are supported financially.


Cassie Sauer, spokeswoman for the Washington State Hospital Association, says that organization began pursuing legislation targeted at specialty hospitals several years ago, when one was being proposed in Tacoma.


With the passage of SB 5398, she says, Weve just become a pretty unattractive market if your goal is to make a lot of money.


Seppi, who practices internal medicine at Physicians Clinic of Spokane, says the Spokane County Medical Society didnt take a formal position on the bill, and its members probably had mixed feelings about the measure. The local doctors organization is affiliated, though, with the Washington State Medical Association, which opposed the bill.


Generally, we would want to have as much choice as possible for patients, while still striving to work as closely with the general hospitals as possible to support the missions they serve, Seppi says


Dr. W. Hugh Maloney, president of the state medical association, lauds general hospitals as beacons of light, but argues that their efforts to maintain their control over the marketplace by lobbying for onerous requirements on specialty hospitals is anticompetitive.


We think that banning such hospitals actually hurts patients and physicians. We think patients deserve a choice, and doctors do, too, if they believe they can provide certain services better than the general hospital can, Maloney says.


Rep. Lynn Schindler, R-Spokane Valley, who voted against the specialty-hospital bill, agrees with Maloney. She says she had voted in favor of a similar bill a couple of sessions ago, but changed her mind this time for a couple of reasons.


I really sincerely believe the best kind of care is consumer-driven care, because that is what I believe will bring the costs down, she says.


Because specialty hospitals focus on particular types of care, she says she thinks they have the potential to get patients in and out of surgery more quickly, thereby containing costs. She says she sympathizes with general hospitals concerns that they would be left with a greater percentage of patients for which they receive inadequate reimbursement, but says, I think you need to look at fixing that problem (through better funding) rather than limiting consumers who want to do it a different way.


She adds, The other side of it is the docs. Theyre looking at it from the standpoint of having more control, which seems appropriate and potentially could lower costs. I dont see why we cant give it a shot and see what happens, she says.


Maloney, an internal-medicine doctor, says he doesnt think the bills passage necessarily shuts the door on specialty hospitals in the state.


Physicians as a whole are intelligent, analytic, persistent, and innovative, he says. Im sure this will be a speed bump in the road and there will be other ways of looking at it, and coming up with something thats politically feasible.


Contact Kim Crompton at (509) 344-1263 or via e-mail at kimc@spokanejournal.com.