The practice of medicine continues to be a lucrative business, at least for some doctors.
Only yesterday I posted about how medical insurance, unlike car or life insurance, is little more than passing on budget-killing costs to an increasingly needy public, and this morning I read in the Joplin Globe about a new “specialty hospital” that is to be constructed on the Kansas state line just west of Joplin and on the outskirts of Galena, pop. 3,287 (as of 2007). It is to be a $13,500,000 companion piece to the existing clinic run by Orthopaedic Specialists of the Four States. The Globe article carried this remark about the financing involved (emphasis supplied):
Ortho Four States and its doctors will finance the building and equipment, but under a contract expected to be approved today (10/27/2011) by the City Council, the city will own the building and lease it to the doctors.
City Attorney Kevin Cure, at Wednesday night’s meeting, said federal law prohibits doctors from receiving Medicare or Medicaid payments from patients at a hospital the doctors own. He said that made it necessary for the city to own it.
Cure said potential revenue to the city from the hospital operation is conservatively estimated at $177,000 in the first year to $1.6 million in year 10.
The financing here raises questions in my mind. The doctors are financing the hospital and setting the prices (except in the cases of Medicare or Medicaid patients, something discussed in comments under my “Insurance” post). The city of Galena clearly benefits from this arrangement – patients and staff patronize Galena businesses.
The city attorney says Galena anticipates an estimated $177,000 in revenue from the operation the first year, growing to $1.6 million in the tenth year. The nature of this “revenue” is isn’t clear to me, but I suspect it has something to do with how the city will come to “own” the 65,000 square foot building. Is it buying it? What is the city’s part of the investment, if any? Is it issuing bonds? Is it borrowing the money from the doctors? If so, at what interest?
Also questionable in my mind is the welfare of the taxpayers in all this. The Globe reporter says that the new building will be exempt from property taxes, so I assume that the cost of extending city services to the facility will be supported by the taxpayers. Maybe that’s a good deal for everyone, I’m not sure. I hope someone can answer these questions for me.
Let me be clear, I can’t fault doctors from trying to legitimately maximize their incomes, given the medical system we now have, but I am concerned that this deal appears to be a clear evasion of the intent of federal law designed to protect patients and taxpayers from conflicts of interest on the part of doctors.
Image by pheezy via Flickr
And I leave you, dear reader, with these final questions. Are financial maneuvers of this nature symptomatic of why medical costs in the U.S.A. are more than double what they are in Canada and Europe? I believe they are. This is the profit motive at work. Does service suffer because of it? I don’t know, but I do know the effect on costs: in the absence of true competition (who shops for a hospital?), it makes them higher. Meanwhile, people all across the country are postponing needed care because of soaring costs, healthcare costs that are at the very heart of the national debt crisis. In my opinion we could reverse that by embracing a Public Option or a single-payer system.
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- Dr. Oz motivates workers, greets patients at free LA health clinic (abclocal.go.com)
Still Skeptical After All These Years 
I would really like to see more detail on this project. I could see the doctors pooling costs on equipment and staffing – there’s a setup like this near where I used to live in the Chicago suburbs, where several doctors of various specialties (GP, Pediatrician, OB/GYN, etc.) had individual offices but a joint lab, records keeping, billing, and so forth. It would be a welcome financial break IF this is what’s going on in this example. (And that’s a big “IF”, without more detail.)
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I also am awaiting more clarity on the Galena project, John. In the meantime, I recommend the “related articles” at the end of the post for further perspective. They popped up on WordPress and I found them surprisingly relevant. 🙂
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I didn’t really understand the financial arrangements involved here and don’t know what’s customary or legal. I do know doctors frequently get together to help fund hospitals so that they, the community, and the patients all benefit from such a facility. One reason rural areas are so medically underserved is because doctors want to practice where they will have access to hospitals, labs, operating rooms, nursing and support staffs, and other doctors for consultation and referrals. Seems to me with the shortage of medical services across the country, a new hospital is a win-win for all concerned.
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I get your empathy here, Pied, but what raises my suspicions is that it is an orthopedic specialty hospital, not a general hospital. The article didn’t specify, but I am assuming this is a “for-profit” facility, and it is right on the Kansas side of the state line, obviously for financial reasons. Knowing you are the daughter of a physician I would be very interested in your opinion of the “related article” at the bottom of the post about for-profit medicine.
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Well, an orthopedic specialty hospital would have a more limited draw than a general hospital, but it’s still the same principle — concentrating and focusing resources. My understanding is that with for-profit hospitals, the doctors are employees of the hospitals; the hospitals set the rates. Doctor-owned hospitals would be different, of course. I don’t believe for a minute that any decent, ethical doctor gives a thought to profit when considering what treatment to recommend to a patient. The charges are up to the hospital, and may well rise to obscene levels — partly because of the hospital’s profit motive but, like any other business, also because of its overhead costs to suppliers of medical equipment, supplies, drugs, malpractice insurance, etc. Of course doctors expect to make a living practicing medicine, or they’d have to do something else, but the patient’s welfare comes before any “profit motive.” There’s a reason why the doctor’s office and exam rooms are separate from the billing department. I’ve run across several doctors who knew nothing about the billing, the charges, the status of my account, etc. They were practicing medicine; someone else worried about the bills. I think this is probably true of most doctors.
I dismiss out of hand the “end of life” surgery article. Nobody gets operated on without them or their legal representative giving written consent. Doctors don’t stand around ghoulishly waiting for the chance to operate on dying people just so they can slap a huge medical bill on the survivors or on Medicare. (Of course I suppose there’s the possibility of some “defensive medicine” being practiced — trying to do everything possible for fear the survivors will sue if the patient dies. But where that happens, if it happens, I’d blame a litigious public that has made a business [talk about greed] out of suing the very doctors who are trying to help them.) Frankly I worry more about the alternative — that some bureaucrat may someday decide to deny me treatment because I’m to old to justify the expense, ie, I won’t live long enough for them to get a return on their investment.
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BTW, a specialty hospital is not unusual. Okla. City, for example, has an orthopedic hospital and a heart hospital, both fine facilities.
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Right, Pied, I know that, and I don’t have a problem with the concept. Specializing is a sensible way to minimize errors and maximize efficiency in any business. I recall when corneal keratotomy came in vogue – there was a Russian doctor who became “expert” in the procedure. He had a “lazy susan” style of operating table built. A bunch of patients would be positioned on it and the table would rotate under his equipment to maximize his throughput efficiency. That was carrying it a bit too far in my opinion.
Look, I am not down on doctors in general and I am not against efficiency, I am for it. The problem I am trying to tackle here has to do with healthcare costs that have spiraled out of control. The medical world would look and operate a lot different, IMHO, if we had a Public Option system, and I think most doctors would rather be relieved of the pressures of business so they could concentrate on just being doctors.
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Hi Jim! Thanks for the Pingback.
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Jim,
I am more interested in the comment by the City Attorney saying doctors cannot receive Medicare or Medicaid payments if they own a hospital. First I wonder if it is true and second why such a law in in place (if it is).
I know that doctors, as investors, own nurising homes. I also know doctors have ownership of some sort in the Four States Medical Offices or facilities (including surgery) in Joplin and they receive Medicare payments for surgery performed there.
So is it just for “hospitals” and how in that term defined, legally as far as ownership is concerned.
Then of course I know of at least one doctor in town (pre tornado) that owned outright his own mini-hospital. It was his “office” but complete with full lab, MRI, X-ray, etc. and most of his patients are older folks.
As long as a hospital is accredited, meets operating standards common to all such facilities, etc. why does it make a difference who owns the facilities.
Finally, if no property taxes are levied where in the world does the city expect to receive $1.6 million per year in income. “Kickbacks”!!! What is the “sales tax” when a doctor operates on a broken leg???
All of this is vague to me.
Anson
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You ask some valid questions, Anson. I hope an expert will appear to answer them. Meanwhile, though, I am willing to speculate on some.
I have to assume that the City Attorney knows his law regarding the conflict of interest issue, and I’m guessing it’s there because the medical system lacks both opportunity and motivation by the patient to shop with a concern for cost. When you need a hospital, you need a hospital. Sometimes insurance mandates where the patient goes, if there’s time, but otherwise it’s a choice with no planning, is it not? (Which is the better cost bargain, Freeman or Mercy? Answer: I don’t know either.) And if your doctor can steer you to his facility, say for elective surgery, and charge the insurance company more than the going rate, is that really the kind of competition that makes capitalism run? I don’t think so.
Also in the mix is the variable of tests and treatments, the extent of which is a matter of judgement by the physician. Based on what I’ve read, excessive tests are a big part of the cost problem. If the doc owns the CT and the MRI, there would be a temptation to over-test. That factor, I admit, is also driven by legal concerns over missing some unlikely indication.
It’s significant to me that the present and future facilities we’re talking about are just a few yards over the state line. That is all about money for sure, so games are being played with taxes, real estate and the business activity. I’m OK with it so long as everything is transparent and legal, but then I am skeptical by nature. My blog title says it.
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I wonder about the Medicare statement too. My father has been paralyzed and on a ventilator for 17 years. He has had 2 fairly lengthy stays at Landmark Hospital (Joplin). I know that this is owned by a couple of Cape Girardeau doctors, but it appears that they have set up a ‘holding company’, maybe because of this rule.
http://landmarkhospitals.com/about_us.aspx
I see no reason for Galena’s situation to not be the same. Surely this is a tax issue, giving a pass to some doctors for what reason??
Something seems fishy here. I don’t trust their reasoning.
City politics usually deserves the mistrust of the people. Much is done behind the scenes, hoping nobody will investigate. I’ve had my share of doubts on some deals here:
http://kansasmediocrity.wordpress.com/?s=redtail+ridge
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“federal law prohibits doctors from receiving Medicare or Medicaid payments from patients at a hospital the doctors own. He said that made it necessary for the city to own it.”
I suspect that the law being referenced is the “federal anti-kickback statute, 42 U.S.C. § 1320a-7b(b) which prohibits individuals or entities from knowingly and willfully offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid or any other federally funded program (except the Federal Employees Health Benefits Program). Some courts have interpreted the law to cover any arrangement in which one purpose of the remuneration is to induce or compensate for program referrals.”
I could see where concern for abuse of Medicare and Medicaid programs could arise, considering that an institution’s owners supply and determine prices for use of technology, while doctors decide when that technology is to be used. The over recommendation of expensive technologies are a sizable piece of our current healthcare costs. The question is whether or not doctors will use their medical referral authority to increase institutional profits and hence, their own profits. It would seem to me that the temptation would be far to great.
http://www.ssa.gov/OP_Home/ssact/title11/1128B.htm
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I think so too, HL. In fact, I recall seeing a CBS 60 Minutes expose’ on Medicare fraud where doctors were referring not only clients to their own stores for wheel chairs and the like, but also deceased patients to same. Never underestimate the entrepreneurial spirit, eh?
Thanks for the reference.
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“Cure said potential revenue to the city from the hospital operation is conservatively estimated at $177,000 in the first year to $1.6 million in year 10.”
Although that sounds great for the city, I can’t help but wonder about all the “backroom” negotiations, and carefully constructed positive rewrites for press release. I wonder what other revenue was negotiated that never made it to the press? Carrion attracts vultures!
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To all,
This and the preceeding blog are complicated subjects, very complicated.
My first venture into public writing arose about 4 years ago in the midst of the “Emma Frank” case here in Joplin. A 95 yr old women was appointed a ward of the state and all hell broke loose. Included in the “mess” was the physician that diagnosed her as incompetent to mange her own finances. He did so in a ten minute interview! He also is an investor in a bunch of local nursing homes. Now connect those dots it you like. Unbeknowst to most he waited some three years for his case (civil) to come to closure and it finally did. It was thrown out of court for lack of…..? No penalty no nothing as far as that doctor was concerned expect some brief and bad publicity, about 4 years ago. Now tell me who in the general public can make an informed decision in that matter?
Sekan’s farther has now been on a ventilator for 17 years. No disrespect to Sekan but for sure such a situation begs the question of who has paid for such care for those 17 years and how much has been spent to keep a man alive on a ventilator all those years. Again, no disresect to Sekan or his family but at least using anonymity, such cases should be the subject of public debate.
To me both of these blog and much previous debate herein on the subject of HC funding boils down, ultimately to the $2.5 Trillion a year we spend on HC in the U.S. NO ONE can afford to pay for all of that HC, not individuals, not govenment, not private insurance. Somehow that number must come down rather dramatically. But any attempts to do so raise all sorts of concerns over fairness, equality of treatment, and the list goes on and one. Single pay, public option, let the market dictate prices all have grave flaws.
I wish any of us knew the right answers but I have yet to see any comprehensive solutions that work best for all Americans, not Europeans or Canadians. There is a difference I believe. Clearly stated though perhaps arrogantly so, we are better than they are in how we have thus far governed our society. Just because it works (or not) for France is not in itself a compelling argument to make dramatic changes here in the USA, at least for me. Hell the French are about to “take to the streets” to keep or have full retirement at 55 years of age!!
Anson
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Kevin Cure, Galena Attorney knows nothing about “Conflict of Interest”…. He is attorney for the City of Galena, and for the Mayor and his family, for Brian Jordon who has the “House of Deceit” here in Galena. I contacted him to do something about that house and he represented the owner to sue me for telling the truth that thee were no murders in that house. He represented the Cherokee County Commissioners also….etc.
See: “Galena Citizens for Old Time Values: Exposing the Corruption & No on Galena having gambling in the city..Facebook
As far as the medical buildings, the Mayor, Dale Oglesby, Brian Jordon, and Roger Hines owns at least three and probably many more. Galena is not making anything, I bet, but the mayor is..
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Galena is going broke and the Doctors are making a fortune off Galena. By 2012 they had made 90 Million. The Docs own everything and Galena runs the hospital and pays them to lease the building when the city built it using Industrial bonds and borrowed 3.2 Million; the expenses of running the hospital in 2014 are abt. 17 Million dollars and next year will be 25 million.
Galena has laid off 10 men and raised the property tax in Galena 44%, raised the Water and trash bill to $65-$85 per month. There is a petition going around for a Federal Grand Jury to come in and investigate a “sneaky snake” landfill they tried to pull on the Riverton people.
We Love Galena “We the People” Demand Answers From the Mayor
Galena Citizens for Old Time Values: Exposing the Corruption
Riverton Anti-Landfill people have a site also..
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