Following the highly publicized deaths of two specialty hospital patients where neither specialty hospital had a physician on duty at the time of the emergency and both hospitals called 9-1-1, on January 10, 2008, the U.S. Department of Health and Human Services Office of Inspector General ("OIG") issued a report summarizing its evaluation of how physician-owned specialty hospitals manage medical emergencies. In the report, the OIG noted that CMS does not currently have a way to identify and track physician-owned specialty hospitals and recommended that CMS develop a system for this purpose.

For this report, the OIG reviewed the emergency departments, staffing schedules, staffing policies, and written policies and procedures for handling medical emergencies and interviewed administrators at 109 physician-owned specialty hospitals (defined as hospitals that primarily perform cardiac, orthopedic, or surgical procedures and are partially or fully owned by physician investors) for the report.

The most significant finding in the OIG report was that more than 1/3 of the hospitals reviewed may not be in compliance with the Medicare Conditions of Participation ("CoPs"). Specifically, the OIG found that:

  • 7 hospitals did not have a registered nurse on duty during at least 1 of the 8 sampled days, as required by 42 C.F.R. § 482.23(b)(1);
  • 1 hospital did not have a physician on call or on duty during at least 1 of the 8 sampled days, as required by 42 C.F.R. § 482.12(c)(3);
  • 37 of the hospitals reviewed (34%) use 9-1-1 to obtain medical assistance to stabilize a patient, a practice that is not in compliance with the Medicare CoPs according to a CMS memorandum to State Survey Agency Directors entitled "Provision of Emergency Services – Important Requirements for Hospitals" issued on April 26, 2007.

Other findings in the report involved the extent to which physician-owned specialty hospitals rely on the use of 9-1-1 to transfer patients to other hospitals, the prevalence of emergency departments in physician-owned specialty hospitals, the extent to which physician-owned specialty hospitals lack physicians on-site at all times, and the inadequacy of many physician-owned specialty hospitals' written policies for managing medical emergencies.

The OIG made several recommendations related to these findings. The OIG also indicated that it was forwarding to CMS for appropriate action the information about the 8 hospitals that did not meet the staffing requirements set forth in the Medicare CoPs and the 37 hospitals that use 9-1-1 to obtain assistance in stabilizing patients during medical emergencies.

The OIG's report confirms many of the concerns expressed by members of Congress and others about the care that patients receive in specialty hospitals, particularly in emergency situations. Based on the OIG's findings, the healthcare industry should expect to see further congressional and regulatory action in this area in the near future.

The OIG's report is available online.