Prognosis Profits

April 22, 2015

Lawmakers: Surgery centers would provide alternative to high hospital bills

Hospitals could face significantly more competition for routine surgeries under a bill that proponents say could save N.C. patients and taxpayers hundreds of millions of dollars.

This story was originally published in the Observer on 3/11/13.

Hospitals could face significantly more competition for routine surgeries under a bill that proponents say could save N.C. patients and taxpayers hundreds of millions of dollars.

N.C. House Bill 177, sponsored by three Republicans, would make it easier for physicians to open same-day surgery centers, offices that typically charge far less than hospitals for outpatient procedures.

Introduced two weeks ago, the legislation is already facing stiff opposition from the state’s powerful hospital industry. The N.C. Hospital Association contends the bill would benefit a few doctors at the expense of hospitals, but would not cut costs or save state money.

The state severely limits the number of new operating rooms.

The bill’s supporters say that’s because North Carolina has one of the nation’s most restrictive certificate of need (CON) programs. The CON laws were designed to prevent excessive facilities and equipment. But instead of reducing costs as intended, the bill’s proponents say the program squelches competition and makes routine surgeries more expensive.

The new legislation aims to change that. Supporters say more competition is bound to help patients and taxpayers.

“Lawmakers have a chance to give citizens relief from extraordinarily over-inflated hospital prices,” said Ardis Watkins, legislative affairs director for the State Employees Association. “It’s ridiculous if they don’t take that opportunity.”

A 2012 investigation by the Observer and the News and Observer of Raleigh found that hospitals and hospital-owned clinics tend to charge considerably more than independent doctor’s offices for many common drugs and procedures.

The legislation would give more options to patients seeking routine same-day procedures, such as tonsillectomies and cataract surgeries.

Among the bill’s provisions:

• In most counties, the state Medical Facilities Plan would no longer limit the number of single-specialty operating rooms for ambulatory surgery centers, offices focused on providing same-day surgical care. An exception: The bill would not allow new ambulatory surgery rooms in 23 counties with small, financially vulnerable hospitals known as “critical access hospitals.”
• Those applying to open new operating rooms would be required to demonstrate that they expect to perform at least 800 procedures per room each year while complying with all licensing rules. They’d also have to develop plans for serving indigent patients.
• Diagnostic centers would be exempted from certificate of need review for certain imaging equipment, including CT scanners and X-ray machines.
• Hospitals would be prohibited from relocating operating rooms from their main campuses to separate locations. Off-campus offices owned by hospitals often charge hefty “facility fees” that the bill’s proponents say unnecessarily drive up the cost of health care.

Ambulatory surgery centers, such as Charlotte Surgery Center on Randolph Road, are relatively rare in North Carolina, the bill’s supporters say. Fewer than 100 of them operate statewide, and according to one recent analysis, the number of centers per capita is well below the national average.

Price gouging?

The state employees association and the hospital association have turned to Twitter to debate the bill’s merits.

“When the state employees union backs a GOP bill, there’s a problem. #defeat177,” tweeted Cody Hand, the hospital association’s deputy general counsel.

“Your client/hospitals are trying to protect their price gouging of the taxpayers and patients,” responded Dana Cope, the employees association’s executive director.

The bill is modeled after 2005 legislation that made it easier for N.C. gastroenterologists to do colonoscopies and endoscopies in their own offices. Supporters say that law has given patients a lower-cost alternative to hospitals.

The legislation, which exempts gastroenterologists from the usual certificate of need assessments, saved patients, insurance companies and taxpayers more than $220 million over six years, according to an analysis by David French, a consultant who is helping supporters of the new bill.

Medicare, Medicaid and commercial insurance all typically reimburse ambulatory surgery centers at substantially lower rates than hospitals. Medicare, for instance, pays hospitals an average of more than $1,300 for each carpal tunnel surgery – about 73 percent more than it pays ambulatory surgery centers.

Watkins, the employees association’s lobbyist, said it’s time hospitals face more competition. An analysis by the association found that the state health plan, which provides coverage to more than 600,000 teachers and state employees, has been paying hospitals more than three times the Medicare rate on average.

“Why wouldn’t we want to encourage competition to decrease health care costs?” she asked.

‘Wrong public policy’

The N.C. Hospital Association contends the bill would benefit only a small number of doctors.

“HB 177 is the wrong public policy,” association spokesman Don Dalton wrote in an email to the Observer. “Carving out profitable services for private physicians is contrary to having all providers work together to lower cost by managing the health of populations. Duplicating existing services and fueling physician self-referral never cut costs.”

The bill would hurt N.C. hospitals at a time when they are facing more than $7.8 billion in federal payment reductions over the next decade, Dalton wrote.

But Connie Wilson, a former GOP lawmaker from Mecklenburg who is lobbying for the bill, disputes the suggestion that many of the state’s largest hospitals are struggling financially.

She has given lawmakers a list of the money that some hospital chains have set aside for future purchases: more than $2.5 billion at Carolinas HealthCare System, which owns Carolinas Medical Center and its sister hospitals; more than $1.3 billion at Novant Health, which owns the various Presbyterian hospitals in Mecklenburg; and more than $2.4 billion at Duke University Health.

Wilson, a registered lobbyist, represents the N.C. Orthopaedic Association, whose members are mostly independent surgeons.

The bill was referred to the House Health and Human Services committee. Two of the bill’s sponsors – Marilyn Avila, R-Wake and Justin Burr, R-Stanly – are vice chairs of that committee.

Avila acknowledged that getting the bill passed may be a long shot, given the opposition of the state’s hospital association.

N.C. hospitals are among the state’s most powerful interest groups. The hospital association’s political action committee contributed more than $1 million to candidates during the decade ending in 2011, ranking in the top 10 PACs for donations.

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