Montana specialty hospital fight goes to state's high court

With the end of the federal moratorium on physician-owned specialty hospitals, doctors anticipate the debate to move to the state level.

By Amy Lynn Sorrel — Posted Oct. 9, 2006

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The federal moratorium on physician-owned specialty hospitals may have expired, but a group of Montana doctors is fighting a legal battle against a community hospital over a state law that continues to ban the licensing of specialty facilities until July 2007.

The case before the state Supreme Court will decide whether Great Falls Clinic, a multispecialty and primary care practice, violated the state prohibition when it partnered with Essentia Health, a multistate health care system, to purchase Central Montana Surgical Hospital in March.

The facility was designated as an ambulatory surgery center in 1999, long before the state Legislature voted last year to extend the Montana moratorium once the federal ban first lapsed in June 2005, court documents show.

The state statute, which applies to physician- and nonphysician-owned specialty hospitals, included an exception for facilities that already were in existence, which included Central Montana Surgical Hospital.

Doctors say that they bought the surgery center, now renamed Central Montana Hospital, to offer patients more choice in an area where Benefis Healthcare is the only community hospital.

Benefis is a "very strong monopoly hospital that has made a conscious decision to exclude physicians from having input on how patients are cared for," said Steve Akre, MD, chief medical officer at Great Falls Clinic.

The doctors' group says it is operating Central Montana Hospital as a general hospital under its license granted by the Montana Dept. of Public Health and Human Services.

"We aren't trying to be everything to everybody," said Dr. Akre, a retired rheumatologist. "The ultimate decision is going to be made between the doctor and the patient in terms of where they should go."

But Benefis Healthcare sued the Great Falls Clinic and Essentia in March to stop the venture. Hospital officials claim that the doctors plan to run Central Montana Hospital as a specialty facility and refer their own surgery patients there when it is not in patients' best interest. The partners' operation of the hospital would violate the state ban and put access to care at risk, Benefis claims.

Physician-owned specialty hospitals "typically obtain the 'cream' of the best-paying cases," said Keith R. Anderson, an attorney for Benefis.

Central Montana Hospital will be offering only high-paying services to patients while limiting less profitable care, he said. For example, it won't provide an emergency department or intensive care unit, he added.

"With only one community hospital in town, [they're] taking away those money-making procedures from the hospital, and it's a great detriment to the community hospital being able to provide services," Anderson said.

Benefis claims that the statute was intended to protect community hospitals from competition so that they can provide a wider array of services to a diverse population of patients, regardless of their ability to pay.

But a trial court disagreed earlier this year and declined Benefis' request for an injunction to block the doctors' operation of the hospital.

"Nothing in the express wording of the statute supports Benefis' claim that as a matter of law it, as a community hospital, has a right to object to increased competition by another hospital," the Eighth Judicial District Court ruling states.

Benefis appealed the decision to the state Supreme Court. A high court ruling is expected by the end of the year.

Same issue, different stage

Now that the federal moratorium on physician-owned specialty hospitals has lapsed, the debate likely will be taken up on a state-by-state basis, according to Great Falls Clinic attorney Jonathan J. Kudrna.

Montana doctors say they are anticipating a political push by opponents to create more barriers to specialty facilities in the upcoming year. The Montana Legislature meets every two years and will reconvene in January 2007.

"There will either be an outright ban or onerous [requirements] put back into place, which, in limited population areas, would preserve a monopoly," Kudrna said.

The Montana Medical Assn. has not taken a position on the lawsuit but opposed last year's state moratorium on specialty hospitals because of its anticompetitive nature, said Kurt T. Kubicka, MD, MMA legislative committee chair.

Specialty facilities "provide more choice to patients, and there are opportunities for improved quality of care, as well," Dr. Kubicka said.

A group representing Montana hospitals, however, continues to support a permanent moratorium on physician-owned specialty hospitals. They create a conflict of interest that is not in patients' favor, said John Flink, a spokesman for the MHA-An Assn. of Montana Health Care Providers. The organization filed a friend-of-the-court brief supporting Benefis' case.

"We are also concerned about the impact on community hospitals with the 'cherry-picking' of services," Flink said.

Benefis attorney Anderson said that if lawmakers decline to extend the moratorium in next year's session, "we would suggest to the Legislature that hospitals have to provide a minimum level of service, such as an emergency room, so that the community has some access."

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Case at a glance

Benefis Healthcare v. Great Falls Clinic and Essentia Health

Venue: Montana Supreme Court
At issue: Whether a physician clinic violated a state ban on specialty hospitals when it partnered in the purchase of a specialty surgery center.
Potential impact: The doctors say a ruling in their favor would allow them to run the facility as a general hospital to offer patients more health care choices in an area dominated by one hospital. The community hospital says doctors are planning to refer their own surgery patients to the specialty facility and that the physician-owned hospital hurts patient care because it offers only limited services.

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