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Washington, Pa. hospital turns profit from specialty cases

With "fine cuisine" catered in for overnight patients and personalized service, Advanced Surgical Hospital touts itself as the Ritz-Carlton of hospitals.

Owned by doctors, the Washington facility opened last year and turns a profit by being more efficient than traditional hospitals, CEO Lloyd Scarrow said.

That means focusing on elective surgeries while turning away complicated cases in which the patient could end up needing emergency care. The hospital does not have an emergency room.

"I'm not trying to be all things to all people," Scarrow said. "I'm not trying to deliver babies, trying to cure oncology issues and having burn patients come into my trauma unit via helicopter.

"I have a very focused campus and my efficiencies are driven around that."

Sitting on a bluff above Washington Crown Center mall, the hospital has a pharmacy, laboratory and physical therapy area. Because the hospital specializes in certain types of surgical cases -- such as orthopedics, eyes and plastic surgery -- it has doctors and equipment tailored for those procedures.

For patients, the specialty or "boutique" hospitals typically provide the same or better care than typical facilities, said Kenneth Thorpe, professor of health policy and management at Emory University in Atlanta.

They also carve out the most profitable cases.

"The traditional community hospitals have been concerned that the specialty hospitals are taking the cream of the crop off their books and leaving them with all the patients that lose money," Thorpe said.

Nationwide, physicians own 275 hospitals, according to Physician Hospitals of America, an industry trade group. The new federal Patient Protection and Affordable Care Act bans existing physician-owned hospitals from expanding and prohibits construction of such hospitals.

The concern is that when physicians own a specialty hospital, they have a financial incentive to order tests and procedures from which they profit, said Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania.

"You don't want to get over-tested or over-treated because suddenly or overtly, the doctor has an incentive to do more," he said.

Dr. John Gibbons, an orthopaedic surgeon and one of Advanced Surgical's 10 owners, said the financial conflicts at the hospital are no greater than at nonprofit facilities vying for patients and paying doctors based on the number of cases they handle.

Posters throughout Advanced Surgical notify patients about the doctors' ownership interests.

Dr. Vincent Ripepi, an orthopaedic surgeon, and other co-owners say they always advise patients of their options.

"It's always, always a patient choice," Ripepi said.

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