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Outpatient Surgery

Focused Factories? Physician-Owned Specialty Facilities

Abstract

 
Using data from Round Four of the Community Tracking Study site visits, this paper describes the recent rapid increase in physician-owned specialty hospitals and ambulatory surgery centers, reasons for this increase, possible impacts, and potential policy options. These facilities could lead to excess capacity, provision of unnecessary services, and lower quality because of decreased volume at some facilities. They also could reduce community hospitals’ net revenue and thus their ability to subsidize socially necessary but unprofitable services. But regulatory intervention should be cautious, because data on impact are inconclusive, and these facilities could have the potential to function as "focused factories" that improve quality and reduce costs.

In this paper we focus on two forms of specialized facilities: physician-owned ambulatory surgery centers (ASCs) and specialty hospitals. Most are owned by physicians outright or jointly with a local hospital or a national firm that specializes in such facilities. Physician ownership is important to such facilities as a means of gaining patients (in competition with nearby hospitals) and gaining physicians’ cooperation with facilities’ initiatives.

Technological, market, and public policy factors have combined to make ASCs and specialty hospitals more attractive to physicians.² Advances in anesthesia and in surgical equipment (such as the development of arthroscopes for joint surgery) have made outpatient surgery feasible for many conditions.³ Ownership of a specialized facility enables physicians to collect fees for their own professional services and to share in any profit generated from the facility fee paid to the organization that operates the facility—a fee that historically has gone entirely to hospitals. Health plans’ move away from selective contracting, risk contracting, and tight utilization management and the fact that some hospitals are now operating at or near capacity have increased the likelihood that ASCs and specialty hospitals will have enough volume to be profitable.⁴ Payment rates for surgical services are relatively favorable.⁵ And national for-profit firms such as MedCath and United Surgical Partners can offer capital and management experience to physicians willing to enter joint ventures with them.⁶

Three major concerns. Although neither ASCs nor specialty hospitals are a new phenomenon, their growth is causing concern in the hospital industry, state legislatures, and Congress.⁷ The concern centers on three questions: (1) Do ASCs and specialty hospitals provide the cost and quality benefits claimed for focused factories? (2) Do these facilities have a negative financial impact on general hospitals (that is, both individual hospitals and multihospital systems)? (3) Do these facilities increase or decrease access to care?

Unfortunately, little information about these facilities is available. Drawing on data from the Center for Studying Health System Change’s Community Tracking Study (CTS) and on secondary sources, we explore the extent to which physicians are creating ASCs and specialty hospitals.⁸ We identify factors that encourage or impede their creation and discuss the impact of these facilities. We conclude by highlighting key policy decisions for regulators and strategic options for physicians and hospitals. Since physician-owned ASCs and specialty hospitals generally have analogous objectives, potential impacts, and policy implications, we discuss them together but indicate differences when they are present.

The CTS as data source. Since 1996 the CTS has conducted four rounds of site visits, involving more than 2,300 interviews, in the same twelve randomly selected U.S. metropolitan statistical areas (MSAs). We focus on interviews conducted during Round Three (June 2000–March 2001) and Round Four (September 2002–May 2003) with leaders of the three to four largest medical groups, hospitals, and health plans in each area. By "triangulating" responses from these different perspectives, we attempt to arrive at a balanced understanding of what is happening.⁹

Growth Of Specialty Hospitals

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 
Ten specialty hospitals were created or began development during the past five years in the twelve MSAs studied by the CTS. All were created in one of three sites: Indianapolis, Little Rock, or Phoenix. Seven are "heart hospitals"; the others focus primarily on orthopedic surgery. One is wholly owned by physicians and three by local hospitals. The other six are joint ventures between physicians and national specialty firms (four) or local hospitals (two).

Large single-specialty groups can create a specialty hospital themselves (for example, Orthopedics Indianapolis, a sixty-four-member physician group that was created in 1962 but doubled in size in 1999, is developing an orthopedics hospital on its own) or, more commonly, can be an attractive partner for a national firm trying to enter the local market. MedCath, a publicly traded company that has ten joint-venture heart hospitals in operation and three more under development, is the prime candidate. In Little Rock the Arkansas Heart Hospital is a joint venture between MedCath and the fourteen-member Little Rock Cardiology physician group. In Indianapolis both physician–hospital joint ventures occurred when local cardiologists showed interest in creating a heart hospital with MedCath. The recently opened Heart Center of Indiana is a fifty-fifty joint venture between St. Vincent Hospital and two cardiology groups: the Care Group, created in 1999 by a merger, which includes eighty-five cardiologists plus forty-eight primary care physicians who have recently been added; and CorVasc, a group of thirty-five cardiothoracic and vascular surgeons created via a merger in 2001. The Indiana Heart Hospital, which opened in early 2003, is a seventy-thirty joint venture between the Community Health Network hospitals and two cardiology groups consisting of eighteen and fourteen physicians, respectively.¹⁰

Key factors associated with development. Exhibit 1 is arranged as a simple matrix that facilitates inspection of factors or combinations of factors associated with the creation of specialty hospitals. Specialty hospitals were created only in sites where there is no certificate-of-need (CON) legislation requiring regulatory approval for opening a hospital and where large single-specialty cardiology or orthopedic medical groups are present. No specialty hospitals have been created in the sites (Cleveland and Orange County) that lack CON but also lack such groups, or in the five sites that have such groups but also have CON. Specialty hospitals appear less likely to be created in markets with dominant hospitals, whose brand name and large market share might enable them to induce health plans to refuse to contract with such facilities and to persuade physicians not to invest in or cooperate with them. Of the five CTS markets with dominant hospitals, only one had a physician-owned specialty hospital.

Growth Of Ambulatory Surgery Centers

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 
ASCs are less complex to develop, require less capital, and are less likely to be subject to stringent CON regulation than is the case for specialty hospitals. Originally created to compete with hospital inpatient units, ASCs primarily compete now with hospital outpatient surgery departments, where most outpatient surgery is performed. The number of ASCs is increasing rapidly. Medicare-certified ASCs doubled to 3,371 during the past decade, virtually equaling the 3,859 hospital-owned outpatient surgery departments with which they compete.¹² In 2000, 242 new ASCs were created, and 343 were created in 2001, compared with an average of 166 annually in the preceding eight years. Most ASCs are small (two to four operating rooms) and dedicated to providing a particular kind of service.¹³ Ophthalmology has long been the most common service offered, but many ASCs also specialize in gastroenterology (colonoscopy and upper gastrointestinal endoscopy) and orthopedics.¹⁴

Ownership overview. Physicians are whole or part owners of almost all ASCs.¹⁵ Traditionally, ASCs have been created by an entrepreneurial physician or national firm recruiting physician-investors from many small practices. But during the past few years, in the twelve MSAs studied, large single-specialty groups have increasingly been involved in the creation of ASCs.

Orthopedic ASCs are particularly threatening to general hospitals, since orthopedic procedures are one of those hospitals’ most profitable services. We identified at least one physician-owned or joint-ventured orthopedic ASC in six of the twelve MSAs studied; all were created within the past three years. The larger groups operate multiple ASCs, some wholly owned, others in joint ventures with hospitals.

"Medical group leaders emphasized that having a facility designed for their needs increases their productivity and decreases costs."

Key factors in ASC development. As is the case with specialty hospitals, the absence of CON for ASCs and the presence of large single-specialty groups are key factors associated with the development of ASCs. Orthopedic ASCs have been created in all three MSAs that meet these conditions.¹⁶ Syracuse provides a natural experiment suggesting the importance of CON: In that MSA, as in New York State more generally, there was a large increase in ASC creation after the state loosened its CON requirements in 1996. But unlike for specialty hospitals, physician-owned ASCs also exist in three sites where CON for ASCs does exist. Interviewees suggested that this was possible where CON regulation is less stringent, at least for ASCs. The presence of dominant hospitals in a market also seems to make ASC creation less likely.

Impact Of Physician-Owned ASCs And Specialty Hospitals

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 
Few data are available to answer the three "impact" questions with which we began this paper. Here we present the available secondary data and information gained from medical group, hospital, and health plan leaders during the CTS interviews and from a short written survey given to single-specialty group chief executive officers (CEOs) and medical directors and to hospital CEOs at the end of each interview. We obtained completed surveys from thirty-nine (87 percent) of the medical group leaders and twenty-six (79 percent) of the hospital CEOs.

Do specialized facilities lower costs or increase quality, or both? Physician and health plan respondents shared a belief that specialized facilities could provide services at a lower unit cost than in general outpatient or inpatient units. In both interviews and surveys, medical group leaders emphasized that having a facility that they control and that is designed specifically for their needs increases their productivity, decreases costs, and increases quality (Exhibit 2). In these facilities surgical equipment, staff, and scheduling procedures are chosen by the physicians involved and are dedicated to a relatively narrow range of procedures, rather than being multipurpose. Scheduling is less likely to be disrupted by emergencies. By reducing "down time" between procedures, specialty facilities make it possible for physicians to perform more procedures in any given time period.

The secondary data available, although far from conclusive, suggest that there might be reason for concern. In terms of case-mix, a recent GAO report concluded that specialty hospitals treat a lower percentage of severely ill patients than general hospitals, although an analysis conducted by the Lewin Group for MedCath found that patients treated at MedCath hospitals have a higher case-mix severity than patients at peer community hospitals.¹⁷ A report published in this issue of Health Affairs states that hospital outpatient surgery departments treat more medically complex Medicare patients than ASCs do.¹⁸ In terms of provision of unnecessary services, numerous studies have shown that physicians who are in a position to profit from referrals for a service tend to make more such referrals.¹⁹ In one well-designed study, physical therapy clinics in Florida with physician-owners provided 50 percent more visits to patients than were provided to similar patients in facilities without physician-owners.²⁰

Medical group leaders stated that patients appreciate the lack of waiting and the many amenities (including nearby parking) these facilities can offer. They also indicated in their survey responses that the potential to use organized processes to improve quality is an important reason to create specialized facilities. During interviews, however, we were unable to elicit much specific information about such processes, and hospital and health plan respondents stated that they were not aware of them.

Quality of care. Some physician-leaders of specialty facilities argued that they would like to implement more processes to improve care but that because they do not reward quality, Medicare and commercial health plans fail to give physicians an incentive to make the investment. Even without such processes, specialty facilities could improve quality simply because their physicians and other staff work together daily providing the same services again and again. However, if creating specialty facilities leads to excess capacity in a community and service volume decreases in these facilities or in general hospitals (or both), quality could decline along with volume.²¹

Some hospital respondents suggested that quality could be a concern in ASCs because they are subject to less regulation than hospitals are. To be certified by Medicare, an ASC must be licensed by the state in which it operates. Many states delegate this process to one of four private accrediting organizations deemed adequate by the Centers for Medicare and Medicaid Services (CMS). The U.S. Office of Inspector General (OIG) for Health and Human Services (HHS) recently released a report sharply criticizing CMS oversight of ASCs.²² Among other criticisms, the OIG stated that nearly one-third of ASCs have not been recertified by states for five years or more.

Almost no data exist on the quality of care in specialty hospitals, although the MedCath-funded Lewin study claimed that MedCath hospitals have a 12.1 percent lower risk-adjusted mortality than their peer community hospitals.²³ For ASCs, numerous uncontrolled studies of quality have shown that the complication rate is low and that patient satisfaction is high.²⁴

Do specialty facilities have a negative financial impact on general hospitals? CTS hospital respondents argued that ASCs and specialty hospitals can seriously reduce general hospitals’ net revenue by "cherry picking" the best-insured and healthiest patients and by competing for volume in general hospitals’ most profitable service lines—notably cardiovascular and orthopedic services. The American Hospital Association also makes these arguments.²⁵ Cardiac services alone can account for 25–40 percent of a hospital’s net revenue, while orthopedic services are the most important source of revenue for hospitals that do not have cardiac services.²⁶ Selecting the healthiest patients can be profitable because Medicare and many health plans pay for outpatient surgery and for hospitalized patients based on the cost of caring for a patient whose disease and overall health are average.

Hospital executives interviewed stated that they did not have evidence to demonstrate the extent of cherry picking, while medical group leaders denied that such selective referral is an objective for their facilities. As noted earlier, Medicare data indicate that specialty hospitals and ASCs care for healthier patients, although the Lewin study presents the opposite conclusion for MedCath hospitals.

No systematic data exist on specialized facilities’ effect on general hospitals’ finances. Several hospital CEOs stated that their hospital’s net revenue was indeed being seriously and adversely affected by nearby physician-owned ASCs, but most merely expressed concern that this could happen. The large national hospital system HCA stated in its first-quarter report for 2003 that one-third of its lower-than-expected earnings per share should be attributed to greater competition from physician-owned ASCs and specialty hospitals.

"Specialty hospitals and ASCs depend on the general hospitals with which they are competing."

Do specialty facilities increase or decrease access to care? To the extent that they increase capacity and provide an alternative to the general hospital setting for consumers to choose, specialized facilities increase access. However, CTS hospital respondents were concerned that to the extent that these facilities reduce hospitals’ ability to use profits from lucrative services to subsidize socially important but unprofitable services such as trauma centers, burn units, and full-service emergency departments, they could reduce access to care. They argue that, ironically, specialty hospitals and ASCs depend on the general hospitals with which they are competing. When something goes wrong that requires services that are unavailable in the specialized facility, they rely on transfer of patients to general hospitals, which must bear the costs of offering the services of multiple specialties around the clock.

Policy Choices

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 
From a policy point of view, the two most important possibilities to consider are (1) that physician-owned ASCs and specialty hospitals cause financial harm to general hospitals, but that competition is fair; and (2) that these physician-owned facilities harm hospitals not because they function as focused factories that increase quality and enhance efficiency, but because they have unfair competitive advantages.

In the first case, it probably would not be desirable to use regulations that compel these facilities to turn into miniature general hospitals—for example, by requiring specialty hospitals to have twenty-four-hour full-service emergency rooms. If it turns out that well-functioning focused factories hurt general hospitals’ bottom lines and make it more difficult for them to cross-subsidize unprofitable services and patients, it might make more sense to adequately reimburse hospitals for these patients and services than to hamstring efficient, high-quality, specialized facilities.

If, on the other hand, ASCs and specialty hospitals outcompete general hospitals because of advantages that policymakers deem unfair and not in society’s interest, the appropriate solution might be to level the playing field. The difficulty here would be in deciding which potential regulations would constitute desirable "leveling" and which would simply result in unnecessary restriction of competition. For example, if it appears that physicians are providing unnecessary services to patients in order to profit from facilities in which they are investors, the Stark prohibition against physician self-referral could be extended to specialty hospitals and ASCs, to which it does not now apply. Reps. Jerry Kleczka (D-WI) and Fortney H. "Pete" Stark (D-CA) recently introduced the Hospital Investment Act of 2003 to "plug the specialty hospital loophole" in current law. The CMS is considering issuing an administrative ruling that would prohibit physicians from referring Medicare and Medicaid patients to specialty hospitals in which the physicians have an investment. The problem with such a prohibition is that it would cause society to lose any advantages that might come from physician ownership and management of such facilities.

If evidence is obtained that there is a widespread problem with physicians cherry picking the best-insured patients for their facilities while operating on uninsured and Medicaid patients in general hospitals, physicians could be required to treat all appropriate patients in their facilities, although enforcement of such a regulation would be difficult.

The question of physicians’ cherry picking the healthiest patients for their own facilities is more difficult. Such selection might be appropriate—that is, it might make sense to treat healthier patients in lower-acuity facilities. If so, policymakers might want to adjust payments to reflect this favorable case-mix. If it appears that specialized facilities do not have adequate coverage in specialties other than the hospital’s own specialty—and thus are unable to deal adequately with complications or with patients who have multiple diseases—such coverage could be mandated as a condition of licensing and accreditation.

Payment rates should be adjusted in any case. Medicare pays more for some procedures in an ASC than in a hospital outpatient surgery department setting and vice versa, but according to recent reports by the OIG and the Medicare Payment Advisory Commission (MedPAC), it is unlikely that the ASC payments, at least, accurately reflect costs.²⁷ The payment systems for ASCs and hospital outpatient surgery centers were created by different legislation and developed separately, and in any case, Medicare is still using the results of a 1986 survey to calculate ASC costs, many of which might have changed since then because of technological advances. As MedPAC stated, "Medicare should strive to ensure that clinical considerations, rather than financial incentives, drive decisions about the setting in which care is delivered."²⁸

Several more general policy issues should be addressed. First, the CMS should consider adjusting payment rates so that certain services—for example, orthopedic and cardiovascular services—are not much more profitable than other services. Second, the CMS and the states might want to take steps to see that quality is measured in specialty facilities (and general hospitals) and that comparative quality information is made public. Third, more research on ASCs and specialty hospitals is clearly needed. Fourth, the CMS and the states might consider whether the accreditation process for specialty facilities should focus more on quality improvement. Finally, states must decide how to deal with the possibility that the creation of more ASCs and specialty hospitals will lead to overcapacity, which in medical care can lead to higher costs and worse quality. CON regulation is one approach, albeit a very controversial one.²⁹ New York State, for example, concerned by the surge in ASC creation after it relaxed CON regulation, is considering making CON more stringent again. An alternative, more market-based approach would be to make sure that the playing field is reasonably level and hope that competition would weed out the poorest performers.

"If a hospital cooperates in joint ventures, it risks alienating physicians who are not involved and damaging its credit rating."

Strategic Choices

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 
Physicians and hospitals have important strategic choices to make. Despite many specialists’ enthusiasm for the possibility of developing ASCs and specialty hospitals, caution may be wise. Neither joint ventures with local hospitals nor ventures with national firms are free of risk; both involve control issues, and the fortunes of national firms are tied to their performance in the volatile stock market. If the CMS reduces payment rates for certain services (as it has already done for ophthalmology) or if more stringent regulatory standards are adopted, specialized facilities will find it more difficult to succeed.

Hospitals have choices to make both on a policy level and strategically within their local markets: Politically, if ASCs and specialty hospitals really are able to perform well as focused factories, attempts to hold back this tide by regulatory means might be neither socially desirable nor successful.

Strategically, hospitals must decide whether to cooperate with physicians who want to create specialty facilities or to compete with them. For most hospitals, either cooperation or competition with their specialists is fraught with dangers. If a hospital cooperates in joint ventures, it risks alienating physicians who are not involved, losing volume at its own facilities, and damaging its credit rating as a result of lenders’ concerns about hospital financial liability for ventures that fail.³⁰

If a hospital tries to compete by creating its own specialized facilities ("specialty hospitals within hospitals") or by attempting to persuade health plans not to contract with physician-owned facilities, it risks alienating key specialists, and it must bet that facilities owned by a large multipurpose hospital can successfully mimic the advantages of smaller single-purpose facilities owned by physicians.³¹

If a hospital tries to squash physician-owned facilities by refusing to allow medical staff privileges to participating physicians (a practice known as economic credentialing) or by pressuring health plans to refuse to contract with such facilities (as suspected by several interviewed medical group leaders), it risks antitrust litigation and regulatory intervention (the American Medical Association has asked the OIG to look into whether economic credentialing violates the federal prohibition against kickbacks for referrals). Although hospitals have successfully defended themselves in some lawsuits to date, it is not yet clear how the courts and antitrust agencies will ultimately view such activities.³² Meanwhile, it remains to be seen what effects policy choices and hospital and physician strategies have on physician–hospital coordination to contain costs and improve quality.

Editor's Notes

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 
The authors thank Bob Berenson, Alwyn Cassil, Paul Ginsburg, and Cara Lesser for extremely helpful comments, and Gigi Liu and Sylvia Kuo for technical assistance. They also thank the many respondents who generously gave of their time to this study. This research was funded by a Robert Wood Johnson Foundation grant to the Center for Studying Health System Change.

Larry Casalino is a physician and an assistant professor in the Department of Health Studies at the University of Chicago. Kelly Devers is a health researcher and Linda Brewster, a consultant, at the Center for Studying Health System Change in Washington, D.C.

NOTES

Top Growth Of Specialty Hospitals Growth Of Ambulatory Surgery... Impact Of Physician-Owned ASCs... Policy Choices Strategic Choices Editor's Notes NOTES

 

1. R.Herzlinger, Market-Driven Health Care (Reading, Mass.: Addison-Wesley, 1997).
2. See R.Abelson, "Hospitals Battle For-Profit Groups for Patients," New York Times, 30 October 2002; J.A.Jacob, "Cutting into the Market," American Medical News, 15 April 2002; M.C.Jaklevic, "Physicians Use Clout to Win Joint Ventures with Hospitals Despite Fiscal Perils," Modern Healthcare 31, no. 49 (2001): 4–5, 9; and R.Winslow, "Fed-Up Cardiologists Invest in Own Hospital: They’ll Regain Autonomy but Critics See a Grab for More Profitable Care," Wall Street Journal, 22 June 1999.
3. See G.Mezei and F. Chung, "Return Hospital Visits and Hospital Readmissions after Ambulatory Surgery," Annals of Surgery 230, no. 5 (1999): 721–727[CrossRef][Web of Science][Medline]; and M.A.Warner, S.E. Shields, and C.G. Chute, "Major Morbidity and Mortality within One Month of Ambulatory Surgery and Anesthesia," Journal of the American Medical Association 270, no. 12 (1993): 1437–1441.[Abstract/Free Full Text]
4. G.J.Bazzoli, L.R. Brewster, and S. Kuo, "Does U.S. Hospital Capacity Need to Be Expanded?" Health Affairs (Nov/Dec 2003): 40–54.
5. Medicare Payment Advisory Commission, "Assessing Payment Adequacy and Updating Payments for Ambulatory Surgical Center Services," in Report to the Congress: Medicare Payment Policy (Washington: MedPAC, 2003), 133–149.
6. CainBrothers, If You’re Niched, It Might Be Your Fault: Physician-Driven Specialty Hospitals and Ambulatory Surgery Centers (New York: Cain Brothers, 2003), 1–13.
7. R.Voelker, "Specialty Hospitals Generate Revenue and Controversy," Journal of the American Medical Association 289, no. 4 (2003): 409–410.[Free Full Text]
8. P.B.Ginsburg et al., "The Community Tracking Study Analyses of Market Change: An Introduction," Health Services Research 35, no. 1 (2000): 7–16.[Web of Science][Medline]
9. R.K.Yin, "Enhancing the Quality of Case Studies in Health Services Research," Health Services Research 34, no. 5, Part II (1999): 1209–1224.[Web of Science][Medline]
10. For more detail on Indianapolis, see K.J.Devers, L.R. Brewster, and P.B. Ginsburg, "Specialty Hospitals: Focused Factories or Cream Skimmers?" Issue Brief no. 62 (Washington: Center for Studying Health System Change, April 2003).
11. U.S. General Accounting Office, Specialty Hospitals: Information on National Market Share, Physician Ownership, and Patients Served, Pub. no. GAO-03-683R (Washington: GAO, 18 April 2003), 1–18.
12. MedPAC, "Assessing Payment Adequacy." The figure for hospital outpatient surgery departments was computed by CTS analysts for 2001 from the American Hospital Association annual survey of hospitals.
13. CarolBeeler, Federated Ambulatory Surgery Association, Testimony at Federal Trade Commission/Department of Justice Hearings on Health Care and Competition Law and Policy, 26 March 2003.
14. MedPAC, "Assessing Payment Adequacy."
15. CainBrothers, If You’re Niched, It Might Be Your Fault.
16. A table is available from the authors upon request: casalino{at}health.bsd.uchicago.edu.
17. GAO, Specialty Hospitals; and A.Dobson, "A Comparative Study of Patient Severity, Quality of Care, and Community Impact at MedCath Heart Hospitals" (Falls Church, Va.: Lewin Group, April 2002).
18. A.Winter, "Comparing the Mix of Patients in Various Outpatient Surgery Settings," Health Affairs (Nov/ Dec 2003): 68–75.
19. See A.Hillman, M. Pauly, and J. Kerstein, "How Do Financial Incentives Affect Physicians’ Clinical Decisions and the Financial Performance of Health Maintenance Organizations?" New England Journal of Medicine 321, no. 2 (1989): 86–92; [Abstract]W.J.Lynk and C.S. Longley, "The Effect of Physician-Owned Surgicenters on Hospital Outpatient Surgery," Health Affairs (July/Aug 2002): 215–221; and GAO, Medicare: Referrals to Physician-Owned Imaging Facilities Warrant HCFA’s Scrutiny, Pub. no. GAO HEHS95-2 (Washington: GAO, 20 October 1994).
20. J.M.Mitchell, "Physician Ownership of Ancillary Services: Indirect Demand Inducement or Quality Assurance?" Journal of Health Economics 14, no. 3 (1995): 263–289.[CrossRef][Web of Science][Medline]
21. M.S.Vaughan-Sarrazin et al., "Mortality in Medicare Beneficiaries following Coronary Artery Bypass Surgery in States with and without Certificate of Need Regulation," Journal of the American Medical Association 288, no. 15 (2002): 1859–1866.[Abstract/Free Full Text]
22. U.S. Department of Health and Human Services, Office of Inspector General, Quality Oversight of Ambulatory Surgical Centers: A System in Neglect (Washington: DHHS, February 2002).
23. Dobson, "A Comparative Study of Patient Severity."
24. See, for example, B.Bloom and N. Krueger, "Cost and Quality Effects of Outpatient Cataract Removal," Inquiry 25, no. 3 (1988): 383–387; [Web of Science][Medline]W.Dooley, "Ambulatory Mastectomy," American Journal of Surgery 184, no. 6 (2002): 545–549[Medline]; and P.Mowschenson and R. Hodin, "Outpatient Thyroid and Parathyroid Surgery: A Prospective Study of Feasibility, Safety, and Costs," Surgery 118, no. 6 (1995): 1051–1054.[CrossRef][Web of Science][Medline]
25. G.Lynn, "Perspectives on Competition Policy and the Health Care Marketplace: Single Specialty Hospitals" (Statement of the American Hospital Association the FTC/DOJ hearing, 27 March 2003), 1–3.
26. "Doctor-Owned Specialty Hospitals Spur Investor Interest, Capital Hill Worries," BNA’s Health Care Policy Report 11, no. 16 (2003): 532–533.
27. DHHS, OIG, Payment for Procedures in Outpatient Departments and Ambulatory Surgical Centers (Washington: DHHS, January 2003), 1–27; and MedPAC, "Assessing Payment Adequacy."
28. MedPAC, "Assessing Payment Adequacy."
29. C.J.Conover and F.A. Sloan, "Does Removing Certificate-of-Need Regulations Lead to a Surge in Health Care Spending?" Journal of Health Politics, Policy and Law 23, no. 3 (1998): 455–481.
30. L.Martin, Hospital-Physician Joint Ventures: Credit Risks Generally Outweigh Benefits (New York: Moody’s Investor Service, November 2001), 1–4.
31. K.J.Devers, L.R. Brewster, and L. Casalino, "Changes in Hospital Competitive Strategy: A New Medical Arms Race?" Health Services Research 38, no. 1, Part II (2003): 447–470.[CrossRef][Web of Science][Medline]
32. Lynk and Longley, "The Effect of Physician-Owned Surgicenters."

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