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Doctor-backed Orthopedic Hospital to Open

June 23, 2008
Friday, June 13, 2008 Doctor-backed orthopedic hospital to open Denver Business Journal - by Bob Mook Denver Business Journal Kathleen Lavine | Business Journal Sue Hayes, CEO of Colorado Orthopaedic & Surgical Hospital (left), with Dr. Armodios Hatzidakis outside the new facility. COSH is teamed up with Exempla and located across from Saint Joseph Hospital. Some local doctors have a vested financial interest in a $50 million, 75,000-square-foot specialty hospital scheduled to open in Denver this August -- reviving the debate over the propriety of physicians owning specialty centers. Sue Hayes, CEO of the Colorado Orthopaedic & Surgical Hospital, now under construction at 1830 Franklin St., said the new hospital will offer orthopedic patients better care, more efficiency (and hence, lower costs) than what they've come to expect at community hospitals. The 42-bed hospital will employ more than 100 people with a nurse-to-patient ratio of 4-to-1, said Hayes, formerly an administrator for Englewood's Rocky Mountain Surgery Center. Dr. Ted Parks, chief of staff at the new hospital, said because the hospital specializes in one thing -- orthopedic surgery -- it will be easier to control overhead. But some medical experts say the doctors' ownership stake and the specialty concept pose a problem to community hospitals and to the health care system. They contend that physicians could make medical decisions that might serve the bottom line better than they help patients. Critics also maintain that specialty hospitals make money from simple, low-risk and profitable procedures while potentially sticking community hospitals with the sickest, most expensive and least-insured cases. Often, that means the community hospitals will inevitably "cost shift" the uncompensated care to other patients -- fueling the rising cost of health care. "If you're a supporter of the general hospital concept, you'd obviously think this is a bad idea," said Dr. Mark Levine, associate professor of medicine at the University of Colorado at Denver Health Sciences Center's Center for Bioethics and Humanities. Levine acknowledged the debate over ownership wouldn't come up in any other sector of the economy, but he also noted that no other profession is obligated to serve those who can't pay. Hayes maintains the hospital's emergency room would admit all patients who show up, but probably would refer those with severe, non-orthopedic medical issues to hospitals better able to address their needs. Orthopedists also most likely would send patients with heart problems and other medical issues to hospitals where they could get support from other doctors in case complications occurred during surgeries. Located adjacent to the Exempla-Saint Joseph Hospital (which holds a 30 percent stake in the operation), the 41-bed hospital is owned by 26 orthopedic surgeons and an investment group. All told, the physicians own 40 percent of the venture. Physician-owned specialty hospitals are rare in Colorado, but the rapid growth of such medical centers has sparked a nationwide debate in the health care industry. But even before the Colorado Orthopaedic & Surgical Hospital opens, the future of physician-owned speciality hospitals looks somewhat uncertain, amid a (so far, unsuccessful) congressional push to limit doctors' ownership or curb funding from Medicare and Medicaid programs. Members of Congress attempted to attach a moratorium on Medicare reimbursements to specialty hospitals to legislation -- including the Mental Health Parity Bill, the Farm bill and the War Bill. The provisions were voted off the bills. Molly Sandvig, executive director of the Physician Hospitals of America, said in a memo to members that it's rumored the House of Representatives is considering amendments regarding physician hospitals. But Sandvig speculated that President George W. Bush most likely would veto any efforts to change Medicaid and Medicare reimbursements at physician-owned hospitals. Bob Minken, president of Exempla Saint Joseph Hospital and a member of the new hospital's board of directors, said though none of the restrictions passed, the issue remains controversial in Washington. "There's still substantial debate in Congress about the value of efforts like this," he said. He added local hospitals that provide orthopedic services are "obviously not happy" about the new hospital because it will siphon away part of their patient base. Yet, Minken maintains that partnering with doctors is "the right thing to do." To appease concerns about possible "cherry-picking," Minken said orthopedists at the new hospital will be required to match their charity efforts at Saint Joseph's. He said the new hospital is focused on "quality care" and "good outcomes" -- which can only improve the facility's financial pictures. Parks said worries about doctor owners lining their pockets by scheduling unnecessary procedures is practically a moot point, because an unethical doctor looking to make money could schedule surgeries at any hospital in the area. He estimated he would pocket only an additional $25 per surgery by doing surgeries at the new hospital, where Parks holds a small ownership stake. According to the U.S. General Accounting Office, 74 percent of doctors who admit patients to physician-owned specialty hospitals don't have a stake in such facilities. Deb Bennett-Woods, chair of the Department of Health Care Ethics at Regis University, said while health care has its share of problems, stopping the growth of physician-owned specialty hospitals won't solve them. "There's certainly the potential of conflict of interest, but that's true with a lot of areas in health care," Bennett-Woods said, adding there's little data that suggests that doctor-owned specialty hospitals are bad for patients or the health care system. Indeed, she argues the concept could have some merit. "These facilities could deliver [health care] more efficiently and at a lower cost," Bennett-Woods said. "Health care costs are rising and it's a legitimate problem. We just can't keep going with the current system, which is very inefficient and very confusing." Colorado Orthopaedic & Surgical Hospital isn't the first physician-owned hospital in Colorado, but it's one of only a few. About 11 years ago, a group of 95 physicians acquired the former Mercy Medical Center in Denver for a limited-stay hospital that eventually shuttered when it failed to secure managed-care contracts. Colorado Orthopaedic & Surgical Hospital is still negotiating with major health insurers, but Hayes said she's confident the facility will secure contracts before it starts accepting patients in mid-August. The new hospital is scheduled to start business operations on July 29. All contents of this site © American City Business Journals Inc. All rights reserved.