The American health sector has undergone drastic changes over the last five years in terms of its competitive landscape. These changes include independent hospitals’ consolidation into systems, characterized by a rise of proprietary sector and a shift from the inpatient care system to an ambulatory services approach. In addition, the sector has experienced increased formation of physician-hospital joint ventures. The changes have also been characterized by an increase of specialty hospitals, mostly specializing in cardiac orthopedic and surgical services. Most of these specialty hospitals are totally or partially owned by physicians and are mostly concentrated in a small number of states. There were concerns in 2006 that the specialty hospitals have changed tremendously from no-for-profit organizations to profit-motivated organizations (McLaughlin & McLaughlin, 2008).
The congress passed legislation, which gave the CMS a greater responsibility of ensuring control and overseeing the operations of specialty hospitals. Specialty hospitals have increased in operations, although they have been under great criticism by the congress. For example, in 2011, specialty hospitals generated revenues totaling to approximately $36 billion (Tynan, et al, 2009). America has adopted a free market system of the health care sector to enhance provision of quality health care. Specialty hospitals provide health care services for people who have already consulted with a physician in a general community hospital. There have been concerns on the basis upon which the physicians refer patients to specialty hospitals, and some members of the senate demand a disclosure of the referrals (Roy, 2007).
Specialty hospitals have started to respond more frequently to the increasing number of people ailing from certain diseases. For example, there has been proliferation of specialty hospitals dealing with cancer, alcohol and drug abuse as a result of increasing number of people ailing from these conditions. However, there has been a decrease of hospitals offering maternity services as a result of changes in the society, as well as technological changes (Tynan, et al, 2009). The drastic growth of specialty hospitals has prompted concerns about the general hospitals’ ability to compete as most specialty hospitals are focusing on profitable service lines. However, they are the only institutions that can offer real competition to traditional community hospitals in ensuring the provision of quality and cost-effective health care. The congress has been imposing measures, which would hinder fair competition between specialty hospitals and general community hospitals. For example, the Children Health and Medicare Protection Act of 2007 would restrict physician referrals to specialty hospitals, where such physicians have an ownership interest (Burgess, Carey, & Young, 2008). These measures have been among the policies passed by the congress in their efforts to destroy any upcoming specialty hospital, as well as changing management of the existing ones.
One can develop an objective conclusion that specialty hospitals play an imperative role in the health care sector. However, the legislative authority has been under pressure to suppress the operation of specialty hospitals. Specialty hospitals are the only institutions that offer real competition to community hospitals, and the approaches established to control the operations are meant to protect the operations of community hospitals (Roy, 2007).
Senator Chuck Grassley expressed that more than forty specialty hospitals have been developed since 2004 in a senate committee (McLaughlin & McLaughlin, 2008). The proliferation of the specialty hospitals is attributed to the increasing number of people ailing from certain conditions dealt with in specialty hospitals. For example, the cases of alcohol and drug abuse have increased, as well as cancer-related cases. Most of the specialty hospitals provide services in relation to such conditions. Therefore, as the cases of these conditions increase, the specialty hospitals have also been rising to meet the increasing demand. The increase in the number of referrals from the general community hospitals has also boosted the demand for specialty hospitals. This has been the point of conflict since the congress is criticizing this induced demand, which is profit-oriented (Young, 2006 ).
Legislature is a decision-making arm of the government on various policies, not only involving health care system, but also other issues. MedPAC has proposed a system to reduce selected diagnosis-related groups’ (DRG) payments significantly and redefine the number of groupings for orthopedic and cardiac procedures. This has resulted into a campaign from lobbyists of medical device makers, hospitals and specialist physicians to oversee reduction of cost of health care (McLaughlin & McLaughlin, 2008). Redefining the DRGs would enable capturing the differences of severity of the ailments of different patients. Redefinition of the DRGs would facilitate evaluation of the costing system, as well as the quality of health provided to each patient. There is likelihood that some DRGs have high variation in terms of the cost, hence refining would provide a clear understanding of the cost involved (Weems, 2008). This would reduce the tendency of specialty hospitals to select the least costly high return within the selected DRGs.
The weight of DRGs should also be based on the cost of provision instead of the used system of charges. However, this change may develop several complexities, and CMS should consider various issues such as the effect of using cost to charge ratio data. In addition, it should evaluate whether the use of this method will have significant changes as a result of alterations in technology. CMS should also consider the number of hospitals affected by the introduction of the new system, as well as the effects the suggestion would bring to the payment system of different hospitals. MedPAC should facilitate the development of a procedure that would be followed in the implementation process (Damberg, et al, 2010).