- The Washington Times - Friday, August 27, 2010

An Associated Press story sparked a small furor recently when it reported that the Obama administration’s ban on deep-water drilling would cost an estimated 23,000 jobs. With unemployment stuck near 10 percent, consternation over the avoidable job destruction was understandable.

But that’s hardly the only example of how Mr. Obama’s policies are devastating the economy. A little-noticed provision of the Affordable Care Act will wipe out an estimated 25,000 jobs that physician-owned hospitals were expecting to create within the next year or so. To keep the big hospitals on the sidelines of the health care debate, the authors of Obamacare cut a deal that effectively blocks physicians from building or expanding their own specialty hospitals - spiking 39 projects that were on the drawing board before the law was enacted.

The job-killing provisions of Obamacare are particularly ironic given that physician-owned facilities tend to be economically efficient and deliver superior medical outcomes. Stated goals of Obamacare are to tame in-hospital infections, reduce medical complications and cut readmission rates - metrics in which many physician-owned hospitals excel. But health care “reform” hamstrings the tightly focused physician-owned surgery centers while protecting generalist community hospitals with more political clout.

The larger hospitals have long nursed a grudge against the nation’s 265 doctor-owned hospitals. Accusing physicians of “skimming the cream” of the most profitable patients and referring patients to their own facilities, a supposed conflict of interest, the big-hospital lobby has pushed for years to restrict the ability of doctor-owned hospitals to compete. The restrictive proposals made little progress during the George W. Bush years, but tumultuous debate over health care reform put them back into play.

Obamacare architect Sen. Max Baucus, Montana Democrat, proposed to pay for Obamacare’s massive expansion of entitlements in part by imposing a 20 percent cut in Medicare fees for hospital services over the decade. Understandably, the American Hospital Association and the Federation of American Hospitals protested the arbitrary nature of the cost savings. So, the Baucus caucus threw the big hospitals a bone - the crackdown on physician-owned hospitals - in exchange for putting a muzzle on their opposition. Neutralizing the hospital lobby was crucial for the law’s passage.

Section 6001 of the Affordable Care Act prohibited physician-owned hospitals from expanding after March 23. The law also refused Medicare payment to any hospital that does not gain certification as a Medicare provider before Dec. 31.

Surveying its members shortly after the passage of Obamacare, the Physician Hospitals of America (PHA) identified 39 projects under development whose owners had canceled outright, knowing they could not win Medicare certification by the end-of-year deadline, plus another 45 that will be hard-pressed to meet Medicare certification criteria in time. The projects in jeopardy would create roughly 25,000 jobs, according to the PHA.

The arguments against the physician-owned hospitals have little merit. The practice of “self-referral” - referring a patient to a hospital in which a physician owns a piece of the action - is said to create a conflict of interest for doctors. But in practice, the conflict is minimal. Doctors build specialty hospitals in order to gain more control over efficiency and quality of care - training nurses, purchasing special equipment and organizing business processes to optimize a narrow range of medical procedures - not to make big bucks. Because doctors rarely own more than a small fraction of the facility, the financial gain from hospital ownership is nominal compared to the professional fee they earn from performing the surgery. Moreover, insurers often direct where patients go. If doctors’ hospitals cause expensive complications or other problems, the insurers would discourage customers from using them.

Indeed, if anyone has a conflict, it’s the big health care systems, which are snapping up doctors’ practices right and left. Typically, physician employees of big health care organizations must sign contracts requiring them to refer patients within the system. “Hospitals can own doctors; doctors can’t own hospitals,” notes Molly Sandvig, executive director of the PHA. Hospitals tend to restrict patient choice; doctor-owned hospitals expand choices.

Ms. Sandvig’s association has filed a suit in a Texas court seeking an injunction against the Section 6001 on the grounds, among others, that the law is vague and poorly written, violates due process and discriminates against one segment of the hospital industry without any empirical basis. Says attorney Scott Oostdyk: “The doctors are singled out because they are formidable competitors. They can start hospitals up faster, run them better and bring down patient rates. They force change at the larger hospitals.”

The advocates of Obamacare paint word pictures of how they will transform the health care industry around the principles of productivity and quality. But in practice, the law will buttress the status quo - and destroy jobs in the process.

James A. Bacon is author of the book “Boomergeddon” (Oaklea Press, 2010) and the blog of the same name.

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