Feds Lift Ban on Doctor-Owned Specialty Hospitals

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MANY OF YOU KNOW THAT on August 8 the Centers for Medicare and Medicaid Services (CMS) announced that it would resume issuing certificates for specialty hospitals that are owned by physicians. The timing of this decision certainly plays into the predictions of McKinsey & Co. that you will read on pages 9-15 in this issue of THE DARK REPORT.

Healthcare strategists at McKinsey believe that the 20th century business model of the integrated, full-service hospital is rapidly becoming outmoded. Replacing it in the 21st century will be hospitals organized around a limited number of clinical specialties. These hospitals will have two other primary attributes. First, they will provide patients with an experience similar to that currently provided by leading retailers and hotels. Second, in order to achieve superior clinical outcomes, the new hospital business model will involve close collaboration with physicians, including joint ventures and other types of revenue-sharing arrangements. Certainly anything that radically changes today’s hospital business model will also have a dramatic impact on hospital-based laboratory managers and anatomic pathology groups. That is why THE DARK REPORT is providing you with a close look at the strategic reasoning of McKinsey’s experts in healthcare.

My contribution to the discussion is very basic. I believe that employers, Medicare, and Medicaid are now pushing hospitals, physicians, and other healthcare providers to do three basic things. First, to continuously improve the quality of care. Second, to measure clinical care and document the fact that they are actually achieving a higher quality of care. Third, to accomplish this while holding constant, or even reducing, the cost per healthcare encounter.

For my money, that sounds a lot like the best-performing specialty hospitals we already see operating today—most of which are owned by physicians. That is why specialty hospitals are already tough competitors for the slow-responding community hospitals in their cities. Patients want to avoid going “to the hospital.” When given a more pleasant alternative by their doctor—whom the trust—patients are rationally opting to have their procedure done in a specialty hospital, whenever feasible. Pathologists and lab managers should keep an eye on this trend and be ready to provide value-added services to their local specialty hospitals. After all, that’s where growing numbers of patients are likely to be found.

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