By: Jeff Cohen
Florida may become the “next Texas” on the issue of physician owned specialty hospitals. “Next Texas,” since there are a number of examples where the concept launched (and also flopped). Done right, such facilities could be a better fit for many patients, depending of course on patient co morbidity issues. In theory, they would be the perfect bridge between surgery centers and regular acute care hospitals. But the ability of such specialty focused care suggests a better staffing model and more targeted and efficient overhead, instead of the broad-based overhead of an acute care hospital at is spread out aver all cases, including those where overhead allocation is viewed as “just an expense.”
So what issues will physicians have to face when they organize and launch these “new kids”?
Corporate stuff. They’re gonna need help creating the right corporate structure and documenting their relationship so there’s the right balance between clinical control and business control.
Legal stuff. They’re gonna have to understand the Stark Law and also state self-referral laws, like the Florida patient Self Referral Act of 1992. There are certain things they can order and refer for and certain things they can’t. And then there’s the sticky wicket of state licensure. When certificate of need laws relax (like in Florida), these facilities begin to germinate.
Business stuff. They will need to be able to distinguish the kind of cash-based business that their practices may be from the kind of earnings-based business that the hospital will need to be. That means things like ensuring there are plenty of cash reserves, especially because of the Payer Stuff (see below). how many physician-owned hospitals rose and then crashed because they were run like a medical practice? Plenty. The foundation of success for these businesses will come from understanding what kind of businesses they are and then focusing on operations and financial management.
Payer stuff. Most of these facilities are an out of network business, meaning they do not have a contract with any managed care payer to accept any fees for services. They bill and collect what’s “usual, customary and reasonable.” Even more critical is setting up the business in anticipation of payer challenges. There have been many costly battles already between payers and physician owned hospitals. One serious core issue is this: setting clinical protocols in place in anticipation of the argument by payers that what’s being done/been done wasn’t medically necessary and was merely driven by investor physician greed.
This is a very exciting and promising time, but physicians and advisors have to take great care to measure twice (no, three times!) and cut once when it comes to physician owned hospitals.
