In a fight between doctor entrepreneurs and traditional hospital physicians, Chicago has become the latest battlefield over who will control medicine’s most lucrative surgeries.
The tussle centers on the creation of boutique hospitals, cutting-edge centers that some doctors say provide better care and service by focusing on specific diseases and conditions.
An estimated 50 such specialty hospitals are open in the U.S. and more are in the works, designed to compete with traditional facilities for cases involving orthopedic, heart or brain surgeries.
On Chicago’s North Side, a group of neurosurgeons and their financial backer recently won state approval to convert the shuttered Ravenswood Medical Center into a for-profit specialized facility.
“We think we can provide much better outcomes and quality for patients by specializing in one area,” said Peter Breen, president of Chicago-based Neurosource Inc. Its 85-bed Neurologic and Orthopedic Institute of Chicago will open early next year.
“Specialty hospitals are good for consumers. Our entire staff is going to be working to meet the needs of a certain type of patient, so they are naturally going to be much more responsive.”
Critics say specialty hospitals are trying to cherry-pick well-insured patients, leaving poor and uninsured patients to the care of non-profit hospitals. And opponents say specialty centers could put patients’ health at risk, that very sick people might not get the same attention they would at a full-service facility.
“From a social point of view and a patient’s point of view, these are a bad idea,” said Dr. Stephen Ondra, director of the spine program in the neurosurgery department at Northwestern Memorial Hospital in Chicago. “It’s diverting the least complicated and best-insured patients away from the general hospital. That unfairly shifts the burden of the desperately ill . . . and cuts into an already tight profit margin.”
No doubt, these are not the best times for hospitals to encounter more competition for their most lucrative services. One in three of the nation’s hospitals are operating in the red and another third have a total profit margin of less than 3 percent, according to the Chicago-based American Hospital Association.
For most hospitals, specialized surgeries are their lifeblood. Cardiac surgery, for example, often accounts for 20 percent or more of a typical hospital’s total revenue and up to 50 percent of its profit, analysts say.
Just one cardiovascular surgeon can bring in about $3.1 million a year per hospital, according to a survey by Irving, Texas-based physician recruiter Merritt Hawkins & Associates. Neurosurgery is a close second, each specialist generating nearly $2.4 million for the hospital.
“There is a rush now to build more specialty hospitals,” said Sandy Lutz, national health-care research director for PricewaterhouseCoopers in Dallas.
“As consumers pay for more of their share of health care, they are going to want to go to centers of excellence, so these specialty hospitals are trying to tap into that consumerism,” Lutz said. “The question is, can they deliver on the quality?”
The answer is yes, if you ask heart hospital developer MedCath Inc. The Charlotte, N.C.-based company touts a recent analysis by a widely known consultant that shows its heart hospitals have better patient outcomes than other hospitals.
The Lewin Group’s study showed specialized facilities had a 12.1 percent lower “in-hospital” mortality rate, comparing eight MedCath heart hospitals to 1,139 acute-care U.S. hospitals that performed open-heart surgery.
Furthermore, MedCath facilities ranked near the middle of those surveyed on volume of patients who were uninsured or covered by Medicaid, the federal-state health insurance program for the poor.
“A general acute-care hospital requires a large bureaucracy that is relatively expensive and inefficient and that takes away from patient care and the outcomes you are trying to achieve,” said Mike Servais, chief operating officer of MedCath, which opened its first heart hospital in 1996.
MedCath now operates nine heart hospitals and has another four under construction, including a facility in Milwaukee scheduled to open next year.
Operators of specialized facilities also say they can reduce the length of time patients stay in the hospital by focusing on certain diseases or conditions.
Model facility
Neurosource hopes its Chicago facility will be a model for future neurologic and orthopedic hospitals across the country. It plans to add orthopedics and rehabilitation services next year.
The facility’s staff will include some of the area’s best known brain and spine surgeons, led by neurosurgeon Leonard Cerullo and his 22 colleagues from the Chicago Institute of Neurosurgery and Neuroresearch, a medical group that will have an ownership stake in the specialty hospital.
Other neurosurgeons and orthopedic doctors will be approached about buying an equity stake in the specialty hospital, Breen said.
If physicians are owners, they will obtain greater autonomy to better control treatment decisions and provide more cost-effective service, analysts say.
“When doctors have a vested interest in an institution, the quality is enhanced,” Cerullo said. Cerullo’s group became prominent over the last 16 years while located at full-service hospitals like the former Columbus Hospital and more recently at Ravenswood Hospital.
“We really need a home,” Cerullo said. “Our idea here is not to cannibalize from other hospitals. And I would never affiliate with a physician who chose the care of his patients based on their economic wherewithal or whether they had insurance.”
Emergency care
The specialty hospital will continue to staff emergency room services and maintain a medical staff of 140 physicians with a range of specialties. “We will have a full medical staff and a full-service emergency room open 24 and 7,” Breen said.
Critics say, however, that merely having a cardiologist on staff does not compare to the full menu of equipment and technology available around-the-clock at general acute-care and teaching hospitals.
“What if something goes wrong and patients need a higher level of care that’s outside of that very focus of the specialty hospital,” Northwestern Memorial’s Ondra said. “You could have a patient have a heart attack. This could actually be dangerous.”
Without a lengthy track record for such specialty hospitals, health-care leaders in Illinois will be closely watching to see if Chicago’s new specialty center is a viable competitor to general acute-care facilities.
Proponents say general acute-care hospitals have nothing to fear, financially or from a safety standpoint. They compare the controversy over specialty hospitals to the trend a decade ago of physicians developing same-day surgery centers.
After criticizing developers of outpatient surgery centers, analysts say most U.S. hospitals began developing their own. It is now difficult to find a hospital that does not have its own surgery center.
“When the surgery center business started growing, hospitals said they were unsafe and that they were being developed by cream-skimming, money grubbing doctors,” said John Rex-Waller, a former surgery center developer who is now chief executive of National Surgical Hospitals Inc., a Chicago-based developer of inpatient orthopedic surgical hospitals.
“Now, almost every hospital should have or does have their own surgery center because it is more efficient and easier for the patient,” he said. “Hospitals are just trying to protect their turf, and all of that is an anti-competitive reaction to specialty hospitals.”
– – –
Focused treatment areas generate more revenue
Physicians specializing in the treatment of heart and neurological problems are among the biggest revenue generators for hospitals because of the risks, complexity and expertise involved.
ANNUAL REVENUE GENERATED PER HOSPITAL PHYSICIAN
By specialty area
Cardiovascular surgery: Involves the heart, blood vessels, arteries, veins, lymph system and other organs within the chest cavity.
$3.13 million
Neurosurgery: Operative and non-operative care of the central, peripheral and autonomic nervous systems.
$2.36 million
Vascular surgery: Disorders of the blood vessels, excluding those next to the heart, lungs, or brain.
$2.22 million
Cardiology: Treatment of heart disorders.
$1.88 million
Orthopedic surgery: Musculoskeletal system including bones, joints, muscles, ligaments and tendons.
$1.86 million
General surgery: Involves surgery in various areas of the body.
$1.83 million
Hematology/oncology: Treatment of disorders of the blood, spleen and lymph glands and various types of cancer.
$1.81 million
Nephrology: Treatment of kidney and urinary system disorders.
$1.70 million
Internal medicine: Diagnosis and treatment of adults.
$1.57 million
Family practice: Treatment of individuals of all ages and genders.
$1.56 million
Note: Revenue data based on a 2002 survey of hospitals nationwide by Merritt, Hawkins & Associates. Specialty definitions by Meritt organization and Advocate Healthcare Web site.
Source: Merritt, Hawkins & Associates
Chicago Tribune
