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'Whole Hospital' Exception Under Fire


The Medicare Payment Advisory Commission seems poised to recommend that Congress get rid of a big loophole in the laws that prevent physicians from sending their patients to facilities in which they have a financial interest.

The "whole hospital" exception was based on the theory that a single physician could not possibly refer enough patients to significantly affect the profitability of his or her interest in an entire general hospital, but it has had the unforeseen consequence of facilitating the rise of physician-owned "specialty" hospitals that focus on a single area such as coronary procedures or orthopedics.

Backers describe these facilities as "focused factories" that provide more cost-effective care for patients and a better environment for physicians, but critics say specialty hospitals skim the most profitable patients from struggling general hospitals. The Medicare Modernization Act placed an 18-month moratorium on the development of new physician-owned specialty hospitals.