Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

PHYSICIAN-OWNED 


SPECIALTY HOSPITALS’ ABILITY 


TO MANAGE MEDICAL 


EMERGENCIES 


Daniel R. Levinson
 

Inspector General 


January 2008
 

OEI-02-06-00310
 
 

 

 

 

 

 

 

 

 

 

 

 

 

Office of Inspector General
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

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conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

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assessments of HHS programs and operations. These assessments help reduce waste, 

abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

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convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To assess physician-owned specialty hospitals’ ability to manage 

medical emergencies. 

BACKGROUND 

Physician-owned specialty hospitals are hospitals that primarily 

perform cardiac, orthopedic, or surgical procedures and are partially or 

fully owned by physician investors. Two recent deaths of specialty 

hospital patients have raised concerns about the ability of these 

hospitals to manage medical emergencies. In both instances, a patient 

experienced complications following elective surgery. Neither hospital 

had a physician on duty at the time the emergency occurred, and both 

hospitals called 9-1-1. The patients were then transferred to community 

hospitals, where they were both pronounced dead. 

All hospitals that participate in the Medicare program must 

demonstrate to the Centers for Medicare & Medicaid Services (CMS) 

their initial and ongoing ability to meet a set of health and safety 

standards, referred to as the Conditions of Participation (CoP). The 

CoPs require that all hospitals have a physician on duty or on call at all 

times. Hospitals are also required to provide 24-hour nursing services, 

furnished or supervised by a registered nurse. In addition, the CoPs 

require that hospitals have written policies and procedures in place for 

addressing individuals’ emergency care needs, regardless of whether the 

hospital has an emergency department. Finally, according to CMS, a 

hospital is not in compliance with the CoPs if it relies on 9-1-1 services 

as a substitute for its own emergency services. However, there is no 

specific Medicare prohibition on a hospital calling 9-1-1 to arrange for 

the transfer of a patient to another hospital. 

The Senate Finance Committee requested that the Office of Inspector 

General (OIG) conduct an evaluation of patient care and safety in 

physician-owned specialty hospitals. This study focuses on hospitals’ 

emergency departments, staffing patterns, and written policies for 

managing medical emergencies. It is based on data from 109 physicianowned specialty hospitals that we identified from a list provided by 

CMS. CMS currently does not have a system in place to track 

physician-owned specialty hospitals or to identify newly enrolled 

physician-owned specialty hospitals. 

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E X E E X E CUTIVE S U MMAR Y 

The study relies on four primary sources of data: (1) a review of 

physician and nurse staffing schedules for 8 sampled days, (2) a review 

of hospitals’ staffing policies, (3) a review of hospitals’ policies for 

managing medical emergencies, and (4) structured interviews with 

administrators at each hospital. 

FINDINGS 

About half of all physician-owned specialty hospitals have 

emergency departments, the majority of which have only one 

emergency bed. Fifty-five percent of all physician-owned specialty 

hospitals have an emergency department. More than half of these 

hospitals have only one emergency bed. Another 17 percent of these 

hospitals have between 2 and 5 emergency beds, 15 percent have 

between 6 and 8 emergency beds, and 8 percent have 9 or 10 emergency 

beds. Medicare does not require that hospitals have emergency 

departments, but some States do have this requirement. 

Not all physician-owned specialty hospitals had nurses on duty and 

physicians on call during the 8 sampled days. Based on our review of 

hospitals’ staffing schedules, 93 percent of physician-owned specialty 

hospitals met these two requirements during our 8 sampled days. The 

remaining 7 percent of hospitals did not meet these requirements. 

Specifically, seven hospitals failed to have a registered nurse on duty 

and one hospital failed to have a physician on call or on duty during at 

least 1 of the 8 sampled days. Hospitals were least likely to meet these 

staffing requirements on weekends. 

Administrators report that less than one-third of physician-owned 

specialty hospitals have physicians onsite at all times. According to 

administrators, 28 percent of hospitals have a physician onsite 24 hours 

a day, 7 days a week. Additionally, 45 percent of the hospitals with 

emergency departments have a physician onsite at all times, compared 

to 8 percent of the hospitals without emergency departments. Medicare 

does not require that hospitals have physicians onsite at all times. 

Two-thirds of physician-owned specialty hospitals use 9-1-1 as part 

of their emergency response procedures. According to 

administrators and our review of hospital policies, 66 percent of 

hospitals instruct staff to call 9-1-1 as part of their medical emergency 

response procedures. Most notably, 34 percent of hospitals use 9-1-1 to 

obtain medical assistance to stabilize a patient, a practice that may 

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EXECUTIVE SUMMARY 

violate Medicare requirements. Almost half of all hospitals (46 percent) 

use 9-1-1 to transfer patients, a practice that is permitted by Medicare. 

Some physician-owned specialty hospitals lack basic information in 

their written policies about managing medical emergencies. Almost 

a quarter of all physician-owned specialty hospitals have policies that do 

not address appraisal of emergencies, initial treatment of emergencies, 

or referral and transfer of patients. In addition, some policies lack 

certain information about managing medical emergencies, such as the 

type of emergency response equipment to be used or the life-saving 

protocols to be followed. 

RECOMMENDATIONS 

Based on these findings, we recommend that CMS take the following 

actions to improve the ability of physician-owned specialty hospitals to 

manage medical emergencies. We recognize that although the scope of 

this study includes physician-owned specialty hospitals, some of the 

recommendations apply to all hospitals. Specifically, we recommend 

that CMS: 

•	 Develop a system to identify and regularly track physician-owned 

specialty hospitals. 

•	 Ensure that hospitals meet the current Medicare CoPs that require 

a registered nurse to be on duty 24 hours a day, 7 days a week and a 

physician to be on call if one is not onsite. 

•	 Ensure that hospitals have the capabilities to provide for the 

appraisal and initial treatment of emergencies and that they are not 

relying on 9-1-1 as a substitute for their own ability to provide these 

services. 

•	 Require hospitals to include necessary information in their written 

policies for managing a medical emergency, such as the use of 

emergency response equipment and the life-saving protocols to be 

followed. 

In addition to making these recommendations, we will forward to CMS 

for appropriate action information on the 8 hospitals that did not meet 

the two staffing CoPs reviewed in the study and the 37 hospitals that 

use 9-1-1 to obtain medical assistance. 

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EXECUTIVE SUMMARY 
 

AGENCY COMMENTS 

CMS concurred with all four of our recommendations. 

In response to our first recommendation, CMS stated that it will add 

information to CMS’s provider enrollment form and the new Provider 

Enrollment and Chain-Operated System. 

In response to our second recommendation, CMS indicated that it 

currently examines hospital compliance with all Medicare CoPs through 

its routine hospital surveys. CMS does not conduct these surveys for 

the 42 percent of hospitals that are accredited by either the Joint 

Commission or the American Osteopathic Association. However, CMS 

investigates all credible complaints, including complaints against 

accredited hospitals. CMS stated that it will ensure that both 

accreditation organizations are aware of our findings. 

In response to our third recommendation, CMS stated that it issued a 

program memorandum to State Survey Agencies during the period that 

we were conducting the study that reiterates its requirements for 

hospitals and addresses medical emergency requirements. CMS 

circulated this memorandum to the national accreditation organizations 

and made it available to the public through its Web site. 

Finally, CMS concurred in principle with our fourth recommendation. 

CMS stated that it will consider whether regulatory changes to create 

more specific requirements for equipment and staff qualifications would 

be appropriate. 

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v

 

 

 

Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

INTRODUCTION ........................................... 1 
 

FINDINGS ................................................. 9 
 

Half of all hospitals have emergency departments ............. 9 
 

Not all hospitals had nurses on duty and physicians on call 

during the 8 sampled days ............................... 10 
 

Less than one-third of administrators report having physicians 

onsite at all times ...................................... 11 
 

Two-thirds of hospitals use 9-1-1 as part of their emergency

 response.............................................. 12 
 

Some hospitals lack basic information in their written policies . . 13 

RECOMMENDATIONS ..................................... 15

 Agency Comments...................................... 16 
 

APPENDIXES ............................................. 17 
 

A: Distribution of Physician-Owned Specialty 

Hospitals, by State .................................. 17 
 

B: Number of Physician-Owned Specialty Hospitals That Have 

 an Emergency Department ........................... 18 
 

C: Number of Registered Nurses on Duty................... 19 
 

D: Agency Comments................................... 20 
 

ACKNOWLEDGMENTS .................................... 23 
 

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Δ INTRODUCTION 

OBJECTIVE 

To assess physician-owned specialty hospitals’ ability to manage 

medical emergencies. 

BACKGROUND 

Physician-owned specialty hospitals are hospitals that primarily 

perform cardiac, orthopedic, or surgical procedures and are partially or 

fully owned by physician investors. 

There is an ongoing debate about the value of physician-owned specialty 

hospitals. Proponents of these facilities state that by narrowing 

services to a select group of procedures, specialty hospitals can deliver a 

higher level of care to their patients, compared to that delivered by 

community hospitals. Critics note that because these facilities are 

physician-owned, they create incentives for physician owners to refer 

their more profitable and healthier patients to their specialty hospitals. 

They argue that this creates a financial problem for community 

hospitals, by depriving them of an important revenue stream without 

alleviating the burden of providing uncompensated care. They also 

believe safety is an issue for specialty hospital patients, because they 

are being treated in a facility that may be less prepared to handle 

postoperative emergencies compared to a community hospital.1 

Two recent deaths of specialty hospital patients have raised concerns 

about the ability of physician-owned specialty hospitals to manage 

medical emergencies. In both instances, a patient experienced 

complications following elective surgery. Neither hospital had a 

physician on duty at the time the emergency occurred, and both 

hospitals called 9-1-1. The patients were then transferred to community 

hospitals, where they were both pronounced dead. 

The Senate Finance Committee requested that the Office of Inspector 

General (OIG) conduct an evaluation of patient care and safety in 

physician-owned specialty hospitals. This study focuses on hospitals’ 

emergency departments, staffing patterns, and written policies for 

managing medical emergencies. 

1 “Physician-Owned Specialty Hospitals: In the Interest of Patients or a Conflict of 

Interest?” Hearing Before the Committee on Finance, United States Senate, 109th 

Congress, First Session, March 8, 2005. 

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INTRODUCTION 

Medicare Enrollment of Physician-Owned Specialty Hospitals 

Congress and the Centers for Medicare & Medicaid Services (CMS) 

imposed several restrictions on physician-owned specialty hospitals 

between 2003 and 2006. The Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA) imposed a 

temporary moratorium on new physician-owned specialty hospitals to 

provide time to study the impact they have on patients, community 

hospitals, and the Medicare and Medicaid programs.2 The moratorium 

limited physician owners’ ability to refer patients to their own specialty 

hospitals and specialty hospitals’ ability to bill any individual, 

third-party payer, or other entity for these self-referrals. The 

moratorium began on December 8, 2003; it expired on June 8, 2005.3 

The day after the moratorium expired, CMS temporarily suspended the 

Medicare enrollment of new physician-owned specialty hospitals 

pending CMS review of the procedures used to qualify specialty 

hospitals for participation in the Medicare program.4 Under section 

5006(c) of the Deficit Reduction Act of 2005 (DRA), Congress continued 

CMS’s suspension until the earlier of August 8, 2006, or the date that 

the Department of Health and Human Services (HHS) could submit a 

plan to address issues relating to physician ownership of specialty 

hospitals.5 HHS submitted its plan to Congress on August 8, 2006, 

thereby ending the suspension.6 The plan included action items for 

HHS to undertake, such as reforming the payment system for inpatient 

hospital services and ambulatory surgical centers and promoting 

transparency of physician investments in hospitals. 

Currently, the exact number of physician-owned specialty hospitals is 

unknown. CMS compiled a list of 130 physician-owned specialty 

hospitals for a study required by the MMA and for its plan to Congress.7 

2 P.L. No. 108-173, ' 507(a) (2003) (codified at 42 U.S.C. '' 1395nn(d)(2), (d)(3), and 

(h)(7)). 

3 The moratorium did not apply to grandfathered specialty hospitals that met the 

requirements of 42 U.S.C. § 1395nn(h)(7)(B). 

4 CMS memorandum to State Survey Agency Directors, “Hospitals – Suspension of 

Processing New Provider Enrollment Applications (CMS-855A) for Specialty Hospitals,” 

S&C-05-35, June 9, 2005. 

5 P.L. No. 109-171, ' 5006(c) (2006). 

6 HHS, “Final Report to the Congress and Strategic and Implementing Plan Required 

Under Section 5006 of the Deficit Reduction Act of 2005,” August 2006. 

7 HHS, “Study of Physician-Owned Specialty Hospitals Required in Section 507(c)(2) of 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003,” 2005. 

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INTRODUCTION 

However, CMS does not have a system in place to identify newly 

enrolled physician-owned specialty hospitals and does not track 

hospitals that are no longer physician-owned specialty hospitals. 

Regulations Governing the Management of Medical Emergencies 

All hospitals that participate in the Medicare program must 

demonstrate to CMS their initial and ongoing ability to meet a set of 

health and safety standards, referred to as the Conditions of 

Participation (CoPs). CoPs define the minimum standards for all 

hospitals participating in the Medicare program. 

Generally, the CoPs require that a physician be responsible for the care 

of each Medicare patient with respect to any medical problem that is 

present on admission or that develops during hospitalization.8 The 

CoPs also require that all hospitals have a physician on duty or on call 

at all times.9 Hospitals are also required to provide 24-hour nursing 

services, furnished or supervised by a registered nurse.10 

Hospitals must have written policies and procedures in place for 

addressing individuals’ emergency care needs, regardless of whether the 

hospitals have emergency departments.11 The CoPs require that if a 

hospital has an emergency department, there must be adequate medical 

and nursing personnel who are qualified to manage medical 

emergencies and who are able to meet “the written emergency 

procedures and needs anticipated by the facility.”12 The CoPs also 

require that if a hospital does not have an emergency department, the 

hospital must ensure that the medical staff have “written policies and 

procedures for the appraisal of emergencies, initial treatment, and 

referral when appropriate.”13 Finally, if the hospital has an emergency 

department, but also has off-campus departments that do not have an 

emergency department, such as imaging facilities or physical therapy 

clinics, the hospital must ensure that the medical staff have “written 

policies and procedures in effect with respect to the off-campus 

8 42 CFR § 482.12(c)(4)(i). 

9 42 CFR § 482.12(c)(3). 

10 42 CFR § 482.23(b)(1). 

11 CMS memorandum to State Survey Agency Directors, “Provision of Emergency
 

Services - Important Requirements for Hospitals,” S&C-07-19 (April 26, 2007). 

12 42 CFR §482.55(b)(2). 

13 42 CFR § 482.12(f)(2). 

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INTRODUCTION 

department(s) for appraisal of emergencies and referral when 

appropriate.”14 

In addition, in April 2007, CMS issued a program memorandum to State 

Survey Agency Directors addressing specific requirements for the 

management of medical emergencies.15 In this memorandum, CMS 

clarified the use of 9-1-1, stating that: “A hospital is not in compliance 

with the Medicare CoPs if it relies on 9-1-1 services as a substitute for 

the hospital’s own ability to provide services otherwise required in the 

CoPs. This means, among other things, that a hospital may not rely on 

9-1-1 services to provide appraisal or initial treatment of individuals in 

lieu of its own capability to do so.” However, CMS notes that there is no 

specific Medicare prohibition on a hospital calling 9-1-1 to arrange for 

the transfer of a patient to another hospital. 

In August 2007, CMS adopted a final rule requiring hospitals to 

inform all patients in writing, at the beginning of their hospital stay 

or outpatient visit, if a physician is not present in the hospital 

24 hours a day, 7 days a week. The hospital must also inform 

patients how the hospital would meet the medical needs of any 

patient who develops an emergency medical condition when no 

physician is present.16 

Prior Studies 

In 2006, the Government Accountability Office (GAO) examined 

community hospitals’ competitive response to physician-owned specialty 

hospitals in their market areas.17 It found that community hospitals in 

markets with and without specialty hospitals did not differ 

substantially in the changes they made to their operations and clinical 

services. 

As mandated by the MMA, the Medicare Payment Advisory Commission 

(MedPAC) and the Secretary of HHS also conducted studies on 

physician-owned specialty hospitals. MedPAC looked at the financial 

14 42 CFR § 482.12(f)(3). 

15 CMS memorandum to State Survey Agency Directors, “Provision of Emergency 

Services - Important Requirements for Hospitals,” S&C-07-19 (April 26, 2007). 

16 Medicare Program, Changes to the Hospital Inpatient Prospective Payment Systems 

and Fiscal Year 2008 Rates, 72 FR 47130, 47413 (August 22, 2007) (to be codified at 

42 CFR § 489.20(v)). 

17 GAO, “General Hospitals: Operational and Clinical Changes Largely Unaffected by 

Presence of Competing Specialty Hospitals,” GAO-06-520, April 2006. 

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INTRODUCTION 

impact of specialty hospitals on full-service community hospitals.18 

MedPAC found no statistically significant difference in the cost of 

providing care to patients at physician-owned specialty hospitals, 

compared to the cost at other area hospitals. However, it found that 

physician-owned specialty hospitals were less likely to treat Medicaid 

patients than community hospitals in the same areas and that 

physician-owned specialty hospitals tended to treat healthier patients. 

HHS reviewed patterns of physician referral to specialty hospitals, as 

well as quality of care and patient satisfaction at these hospitals.19 It 

found that physician owners did not exhibit clear and consistent 

patterns of hospital preference in their referrals, compared to physicians 

with no hospital ownership. However, similar to the MedPAC study, 

HHS found that cardiac hospitals treated healthier patients than 

community hospitals in the same geographic area. HHS also found 

indications that patients at specialty hospitals receive a high quality of 

care, similar to that received by patients at competitor hospitals. 

Additionally, it found that patient satisfaction was very high in 

specialty hospitals and high in competitor community hospitals. 

METHODOLOGY 

Scope 

This study assesses physician-owned specialty hospitals’ ability to 

manage medical emergencies. It focuses on hospitals’ emergency 

departments, staffing patterns, and written policies for managing 

medical emergencies. 

This study is based on data from 109 physician-owned specialty 

hospitals that we identified from a list provided by CMS. The study 

relies on four primary sources of data: (1) a review of physician and 

nurse staffing schedules for 8 sampled days, (2) a review of hospitals’ 

staffing policies, (3) a review of hospitals’ policies for managing medical 

emergencies, and (4) structured interviews with administrators at each 

hospital. 

18 MedPAC, “Physician-Owned Specialty Hospitals,” March 2005. 

19 HHS, “Study of Physician-Owned Specialty Hospitals Required in Section 507(c)(2) of 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003,” 2005. 

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INTRODUCTION 

Identification of Physician-Owned Specialty Hospitals 

For the purposes of its MMA-mandated study, CMS defined a 

“physician-owned hospital” as a hospital that has at least one physician 

owner. It defined a specialty hospital as a “surgical” hospital if at least 

45 percent of Medicare discharges involve a surgical procedure. It 

defined a specialty hospital as “cardiac” or “orthopedic” if at least 

45 percent of its Medicare discharges are classified under the Medical 

Diagnostic Categories for cardiac or orthopedic conditions. Cardiac 

hospitals must also have at least five major heart surgery discharges a 

year; orthopedic hospitals must have at least five major orthopedic 

surgery discharges a year.20 

Currently, CMS does not have a system to identify all physician-owned 

specialty hospitals. It originally compiled a list for the MMA study and 

added to the list for the plan that HHS submitted to Congress as 

required by the DRA.21 The list included a total of 130 physician-owned 

specialty hospitals. CMS surveyed the hospitals it identified, but did 

not fully verify that all of them were physician-owned specialty 

hospitals because some of the hospitals did not respond to the survey. 

Between December 2006 and March 2007, we contacted each hospital on 

the list to verify whether it currently met CMS’s definition of physicianowned specialty hospital. We verified that a total of 109 of the 

130 hospitals met this definition. Of the 21 remaining hospitals, 

14 were not physician owned; 3 hospitals no longer met CMS’s definition 

of a cardiac, orthopedic, or surgical specialty hospital; 3 hospitals were 

terminated by CMS in 2006 and 2007; and 1 hospital was converted to a 

critical access hospital in 2004. 

The remaining 109 hospitals that met CMS’s definition have the 

following characteristics: 66 hospitals are surgical hospitals, 23 are 

orthopedic hospitals, and 20 are cardiac hospitals. They are located in a 

total of 20 States. The five States with the highest concentration of 

these hospitals are Texas (33 hospitals), Louisiana (15 hospitals), 

Oklahoma (9 hospitals), Kansas (9 hospitals), and South Dakota 

(8 hospitals). Appendix A provides a map of the distribution of these 

hospitals. In addition, 42 percent of the hospitals were accredited by 

20 HHS, “Study of Physician-Owned Specialty Hospitals Required in Section 507(c)(2) of 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003,” 2005. 

21 HHS, “Final Report to the Congress and Strategic and Implementing Plan Required 

Under Section 5006 of the Deficit Reduction Act of 2005,” August 2006: Appendix I. 

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INTRODUCTION 

the Joint Commission and the American Osteopathic Association as of 

2006.22 

Review of Staffing Schedules 

We collected and reviewed staffing schedules from each of the 

109 specialty hospitals for 8 sampled days. We selected a sample of 

8 days between July 1, 2006, and December 31, 2006, using a two-stage 

sampling method. First, we divided all the days during our study 

timeframe into eight strata representing each of the 7 days of the week, 

plus one stratum for holidays. Second, we randomly selected 1 day from 

each stratum. Our findings based on these data are limited to the 

sampled days. 

For the 8 sampled days, we requested and received the staffing 

schedules of the physicians and nurses who were on duty or on call for 

each unit of the main hospital and for each off-campus department or 

satellite office operated by the hospital, if applicable. We reviewed the 

staffing schedules for the 8 sampled days from each of the 109 hospitals. 

We identified any instances when a hospital did not meet the Medicare 

staffing CoPs that require at least one physician to be on duty or on call 

at all times and at least one registered nurse to be on duty at all times. 

We also reviewed the number of nurses per shift in the inpatient unit 

for a randomly selected weekday and weekend day from our 8 sampled 

days. 

Review of Hospital Staffing and Emergency Management Policies 

We collected and reviewed each hospital’s staffing policies. We received 

these policies from all but two hospitals.23 In reviewing these 

documents, we specifically looked for how hospitals determine the 

number of staff who are on duty for different shifts and whether they 

designate a certain response time for on-call staff. 

We also collected and reviewed each hospital’s policies for managing 

medical emergencies. We received these policies from all 109 hospitals. 

We also requested any documents that the hospital provides to patients 

describing their emergency care policies and procedures. In reviewing 

these documents, we specifically looked for how the hospital instructs 

staff to respond to medical emergencies, the procedures that should be 

22 The Joint Commission and the Healthcare Facilities Accreditation Program of the 

American Osteopathic Association are two accrediting organizations that have deeming 

authority to certify hospitals as meeting Medicare requirements. 

23 Two hospitals did not submit staffing policies. 

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INTRODUCTION 

followed, and any guidance about the transfer of patients to other 

hospitals. 

Interviews With Hospital Administrators 

We conducted structured telephone interviews with the hospital 

administrator at each of the 109 hospitals. In some instances, other 

staff, such as the medical director, director of nursing, or risk manager, 

were present at the interview. We asked each administrator about 

procedures for the management of medical emergencies at their hospital 

and at any off-campus departments. In addition, we discussed staffing 

patterns for their inpatient, outpatient, and emergency departments, if 

applicable. We conducted these interviews between January and March 

2007. 

Limitations 

We based this study on 109 physician-owned specialty hospitals that we 

identified from a list of 130 hospitals that CMS updated in 2006. This 

list may not have included all physician-owned specialty hospitals. In 

addition, the 109 hospitals that we verified do not include any 

physician-owned specialty hospitals that may have enrolled in Medicare 

since the suspension ended in August 2006. The information from our 

interviews with the hospital administrators is self-reported; we did not 

independently verify their responses. Also, we did not collect 

information from other short-term acute care hospitals and therefore 

cannot make relevant comparisons. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDINGS 

About half of all physician-owned specialty 

hospitals have emergency departments, 

the majority of which have only one 

emergency bed 

Fifty-five percent of all physicianowned specialty hospitals have an 

emergency department. There is 

no Federal requirement that all 

hospitals have emergency 

departments, but some States do require emergency departments in 

hospitals. As shown in Chart 1, many of these emergency departments 

are relatively small. More than half of hospitals with emergency 

departments have only one emergency bed. Another 17 percent of these 

hospitals have between 2 and 5 emergency beds, 15 percent have 

between 6 and 8 emergency beds, and 8 percent have 9 or 10 emergency 

beds. According to administrators, the hours of operation for all of these 

emergency departments are 24 hours a day, 7 days a week. 

CHART 1: 

Physician-Owned Specialty 

Hospitals With Emergency 

Departments by the Number of 

Emergency Beds (N=60) 

58% 

17% 15% 

8% 

2% 

0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

1 2 to 5 6 to 8 9 to 10 Other* 

Number of Emergency Beds 

Percentage of Hospitals With Emergency

Departments 

* One hospital with an emergency department shares the emergency beds of an adjacent hospital. 

Source: OIG analysis of interview data, 2007. 

Among physician-owned specialty hospitals, cardiac hospitals are twice 

as likely as orthopedic and surgical hospitals to have an emergency 

department. Ninety percent of cardiac hospitals have an emergency 

department, compared to 48 percent of orthopedic hospitals and 

47 percent of surgical hospitals. See Appendix B for the number of each 

type of hospital that has an emergency department. Cardiac hospitals 

have a median of seven beds in their emergency departments, compared 

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FINDINGS 

to a median of one bed for surgical and orthopedic hospitals. In 

addition, 72 percent of the hospitals with emergency departments are 

located in three States that require hospitals to have emergency 

departments.24 Seventy-six percent of these hospitals have only one bed 

in their emergency department. 

Several administrators at hospitals without emergency departments 

note that as a safety precaution, their hospital will not admit patients 

with certain conditions. They explain that they will not admit patients 

needing intensive care or a higher level of care than the hospital can 

provide. Additionally, 13 administrators at hospitals without 

emergency departments report that they are located adjacent to or 

across from or are connected to a hospital with an emergency 

department. 

Not all physician-owned specialty hospitals had 

nurses on duty and physicians on call during 

the 8 sampled days 

The Medicare CoPs state that 

hospitals must have, at a 

minimum, a registered nurse on 

duty 24 hours a day, 7 days a 

week, and a physician on call if one is not on duty at the hospital.25 

Based on our review of hospitals’ staffing schedules, 93 percent of 

physician-owned specialty hospitals met these two requirements for our 

8 sampled days. The remaining 7 percent of hospitals did not meet 

these requirements. 

Specifically, seven hospitals failed to have a registered nurse on duty 

and one hospital failed to have a physician on call or on duty during at 

least 1 of the 8 sampled days. Most notably, three hospitals did not 

have a registered nurse on duty for any shift during 1 of the sampled 

days. Another hospital did not have a registered nurse on duty for any 

shift during 3 of the sampled days, as well as for the night shift on a 

4th day. Hospitals were least likely to meet these staffing requirements 

on weekends. 

Most physician-owned specialty hospitals (60 percent) have policies that 

specify coverage requirements for physicians on call. Many of these 

policies state that physicians must be on call around the clock. 

Forty-two percent of the hospitals with on-call policies require specific 

24 These States are Texas, Oklahoma, and Colorado. See 25 Tex. Admin. 

Code ' 133.41(e); Okla. Admin. Code ' 310:667-49-9; and 6 Colo. Code Regs. ' 1011-1, 

Chapter IV, para. 11.1. 

25 42 CFR § 482.23(b)(1); 42 CFR § 482.12(c)(3). 

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FINDINGS 

response times; these policies typically state that on-call physicians 

need to respond within 30 minutes. 

Almost all of the hospitals have policies governing nurse staffing 

requirements. These policies commonly set certain nurse-to-patient 

ratios, factor into account patients’ needs, and/or set a minimum 

number of nurses that a hospital is required to have on duty. 

In addition, according to our review of hospitals’ staffing schedules, 

hospitals typically have between one and three registered nurses on 

duty per shift in their inpatient units. During the day, they have a 

median of three registered nurses during the week and during the 

weekend, they have a median of two registered nurses.26 At night, they 

have a median of two registered nurses on duty during both the week 

and the weekend. See Appendix C for the number of registered nurses 

on duty in the inpatient units during the day and night. 

According to our review of 8 sampled days, the patient census for the 

hospitals varied greatly depending upon whether it was a weekday, 

weekend, or holiday. The median number of patients ranged from four 

to nine during the week and from one to two patients during the 

weekend. During the holiday, the median number of patients was two. 

Most hospitals had patients during the week; however, 46 percent of 

hospitals did not have any patients during one of the weekend days, and 

25 percent did not have any patients during the holiday. 

Administrators report that less than one-third of 

physician-owned specialty hospitals have 

physicians onsite at all times 

According to information provided 

by administrators, 28 percent of 

physician-owned specialty 

hospitals have a physician onsite 

24 hours a day, 7 days a week. 

Medicare does not require that hospitals have physicians onsite at all 

times. Administrators at hospitals that do not have a physician onsite 

at all times commonly explain that their hospital does not employ 

physicians directly. Physicians typically have privileges at the hospital 

and are generally on duty during business hours to perform surgeries 

and/or check on their patients, but the hospital does not manage the 

physicians’ schedules.27 

26 This analysis is based on a randomly selected weekday and weekend day from our 

8 sampled days. 

27 According to the hospitals’ policies, business hours typically include daytime hours. 

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FINDINGS 

Additionally, not all physician-owned specialty hospitals with 

emergency departments have a physician onsite at all times. According 

to administrators, 45 percent of the hospitals with emergency 

departments have a physician onsite at all times, compared to 8 percent 

of the hospitals without emergency departments. Cardiac hospitals are 

more likely than orthopedic and surgical hospitals to have a physician 

present around the clock. Ninety-five percent of cardiac hospitals have 

a physician onsite at all times, compared to 17 percent of orthopedic 

hospitals and 12 percent of surgical hospitals. 

Administrators report that hospitals with emergency departments that 

do not have a physician on duty at all times use on-call physicians to 

staff their emergency department. As one administrator stated, her 

hospital does not have a dedicated physician for the emergency 

department; if an emergency occurs, staff would need to call in the 

appropriate physician. 

Two-thirds of physician-owned specialty 

hospitals use 9-1-1 as part of their emergency 

response procedures 

Based on information provided by 

administrators and our review of 

hospital policies, 66 percent of 

physician-owned hospitals 

instruct staff to call 9-1-1 as part 

of their medical emergency response procedures; however, hospitals 

differ in their usage of 9-1-1. See Chart 2 on the next page. 

About one-third of physician-owned specialty hospitals (34 percent) use 

9-1-1 to obtain medical assistance to stabilize a patient. As noted 

earlier, a hospital is not in compliance with Medicare CoPs if it relies on 

9-1-1 services to provide appraisal or initial treatment in lieu of its own 

capabilities. For example, one hospital’s emergency policy states, “9-1-1 

will be called to the scene to attempt resuscitation.” Another hospital 

has a policy that states, “After hours, call 911 for a Code Blue. Upon 

arrival, [county] EMS will assume responsibility for the patient.” 

Additionally, another hospital’s policy states, “If conditions are such 

that staff should require additional assistance, 911 will be contacted.” 

Almost half (46 percent) of physician-owned specialty hospitals use 

9-1-1 to transfer patients to other hospitals. Medicare CoPs do not 

prohibit using 9-1-1 for transfers. One administrator reports that it is a 

city requirement to use 9-1-1 for transfers because there are no other 

ambulance services available. 

For 6 percent of physician-owned specialty hospitals, it is not clear to 

what extent staff rely on 9-1-1 services. In these cases, the hospitals’ 

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FINDINGS 

emergency response procedures typically state that staff should call 

9-1-1 but the policies do not indicate whether it is for medical assistance 

or patient transfer. 

CHART 2: 

Percentage of 

Hospitals, 

 by 9-1-1 Usage Use 9-1-1- for 

both medical 

assistance and 

transfers 

19% 

transfers 

27% 

Use 9-1-1 for 

medical 

assistance 

15% 

mentioned 

34% 

extent unclear 

6% 

Note: Percentages do not total 100 because of rounding. 

Source: OIG analysis of interview data and hospitals’ policies, 2007. 

Orthopedic and surgical hospitals are more than twice as likely to 

include 9-1-1 as part of their medical emergency response procedures 

compared to cardiac hospitals. In addition, hospitals that do not have 

emergency departments and hospitals that do not have physicians on 

duty around the clock are more likely to use 9-1-1 as part of their 

emergency response procedures. 

9-1-1 not Use 9-1-1 but 

Use 9-1-1 for 

Some physician-owned specialty hospitals lack 

basic information in their written policies about 

managing medical emergencies 

All physician-owned specialty 

hospitals have written policies 

governing the management of 

medical emergencies. However, some 

hospitals’ policies lack basic 

information about how they would manage such emergencies. 

Most physician-owned specialty hospitals have policies that address the 

appraisal of emergencies, initial treatment of emergencies, and the 

referral and transfer of patients. Such policies may identify which staff 

should respond to an emergency to appraise a patient’s condition or may 

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F INDINGS 

contain detailed procedures for using life-support equipment. However, 

almost a quarter of physician-owned specialty hospitals (22 percent) 

have policies that do not address appraisal of emergencies, initial 

treatment of emergencies, or referral and transfer of patients. 

Moreover, some of the policies for the 109 hospitals lack certain 

information about managing medical emergencies. Specifically: 

•	 Twenty-four percent of hospitals do not have policies that mention 

the use of emergency response equipment, such as defibrillators. 

•	 Twenty-one percent of hospitals in which administrators do not 

report having a physician on duty at all times do not have policies 

that provide guidelines for managing medical emergencies when a 

physician is not on duty. 

•	 Fifteen percent of hospitals do not have policies that mention the 

use of cardiopulmonary resuscitation or Advanced Cardiac Life 

Support (ACLS) protocols.28 

•	 Six percent of hospitals do not have policies that indicate who 

should respond to medical emergencies. 

In addition, 2 of the 10 hospitals with off-campus departments do not 

have emergency policies that apply to these departments. One hospital 

does not have a policy. The other hospital has a policy for its main 

campus, but the policy is not applicable to its off-campus department 

because it does not take into account the absence of physicians and 

nurses at the off-campus department. 

28 The ACLS refers to a set of medical interventions used to treat people experiencing 

respiratory and/or cardiac emergencies and stroke, including invasive techniques, such as 

intubation and administration of drugs. Available online at 

http://www.americanheart.org/presenter.jhtml?identifier=3012127. Accessed July 18, 2007. 

. 

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Δ RECOMMENDATIONS 

Our findings raise some concerns about physician-owned specialty 

hospitals’ ability to manage medical emergencies. During the 8 sampled 

days we reviewed, not all physician-owned specialty hospitals met the 

Medicare CoP requirements to have a registered nurse on duty at all 

times and a physician on call if one is not onsite at all times. Over 

one-third of physician-owned specialty hospitals also rely on 9-1-1 to 

provide medical assistance, and some hospitals lack basic information in 

their written policies about how to manage medical emergencies. In 

addition, CMS does not have a system to identify or track the number of 

physician-owned specialty hospitals. 

Based on these findings, we recommend that CMS take the following 

actions to improve the ability of physician-owned specialty hospitals to 

manage medical emergencies. We recognize that although the scope of 

this study includes physician-owned specialty hospitals, some of the 

recommendations apply to all hospitals. Specifically, we recommend 

that CMS: 

•	 Develop a system to identify and regularly track physician-owned 

specialty hospitals. 

•	 Ensure that hospitals meet the current Medicare CoPs that require 

a registered nurse to be on duty 24 hours a day, 7 days a week, and 

a physician to be on call if one is not onsite. 

•	 Ensure that hospitals have the capabilities to provide for the 

appraisal and initial treatment of emergencies and that they are not 

relying on 9-1-1 as a substitute for their own ability to provide these 

services. 

•	 Require hospitals to include necessary information in their written 

policies for managing a medical emergency, such as the use of 

emergency response equipment and the life-saving protocols to be 

followed. 

In addition to making these recommendations, we will forward to CMS 

for appropriate action information on the 8 hospitals that did not meet 

the two staffing CoPs reviewed in the study and the 37 hospitals that 

use 9-1-1 to obtain medical assistance. 

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RECOMMENDATIONS 

AGENCY COMMENTS 

CMS concurred with all four of our recommendations. 

In response to our first recommendation, CMS stated that it will track 

physician-owned specialty hospitals by adding information to CMS’s 

provider enrollment form and the new Provider Enrollment and ChainOperated System. 

In response to our second recommendation, CMS indicated that it 

currently examines hospital compliance with all Medicare CoPs through 

its unannounced initial certification and recertification hospital surveys. 

CMS does not conduct these surveys for the 42 percent of hospitals that 

are accredited by either the Joint Commission or the American 

Osteopathic Association. However, CMS investigates all credible 

complaints, including complaints against accredited hospitals. CMS 

stated that it will ensure that both accreditation organizations are 

aware of our findings. 

In response to our third recommendation, CMS stated that it issued a 

program memorandum to State Survey Agencies during the period that 

we were conducting the study that reiterates its requirements for 

hospitals and addresses medical emergency requirements. CMS 

circulated this memorandum to the national accreditation organizations 

and made it available to the public through its Web site. 

Finally, CMS concurred in principle with our fourth recommendation. 

CMS stated that it currently has the authority to require that hospitals 

have policies and procedures addressing, at a minimum, assessment of a 

medical emergency, initial treatment, and referral as appropriate. CMS 

stated that it will consider whether regulatory changes to create more 

specific requirements for equipment and staff qualifications would be 

appropriate. Appendix D provides the full text of CMS’s comments. 

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Δ APPENDIX ~ A 

Distribution of Physician-Owned Specialty Hospitals, by State* 

MT 

2 

ID 

3 SD 8 

NE 3 

CA 

5 

NV 

1 

UT 

1 

AZ 

4 

NM 

1 

TX 

33 

CO 

1 

OK 9 

KS 9 

WI 

2 

IN 

3 

OH

 4 

NC 1 

PA 1 

LA 

15 

AR 

3 

*States that are shaded do not have any physician-owned specialty hospitals. 

Source: Office of Inspector General analysis of interview data, 2007. 

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Δ APPENDIX~B 

18 11 31 

2 

12 

35 

0 

10 

20 

30 

40 

50 

60 

70 

Number of Hospitals 

 Number of Physician-Owned Specialty Hospitals 

That Have an Emergency Department 

Cardiac Orthopedic Surgical 

With Emergency Department Without Emergency Department 

Source: Office of Inspector General analysis of interview data, 2007. 

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Δ APPENDIX~C 

Chart 1: Number of Registered Nurses on Duty in the Inpatient Units During the Day 

60% 

51% 

50% 

Percentage of Hospitals 

40% 

40% 

31% 

30% 

19% 20%

20% 

14% 

8% 10% 6% 5% 3% 3%

0% 

0% 

0 1 2 to 3 4 to 5 6 to 10 More than 

10 

Number of Registered Nurses 

Weekday Weekend 

Source: Office of Inspector General analysis of hospitals’ staffing schedules, 2007. 

Chart 2: Number of Registered Nurses on Duty in the Inpatient Units During the Night 

60% 56%
 

50%
 45% 

Percentage of Hospitals 40% 36% 

30% 25% 

20% 

10% 

10% 6% 4% 4% 5% 3% 3% 1% 

0% 

0 1 2 to 3 4 to 5 6 to 10 More than 

10 

Number of Registered Nurses 

Weekday Weekend 

Source: Office of Inspector General analysis of hospitals’ staffing schedules, 2007. 

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APPENDIX ~ A 

Agency Comments

Δ APPENDIX~D 
 

 

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APPENDIX ~ D 
 

 

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APPENDIX ~ D 
 

 

 

 

Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Jodi Nudelman, 

Regional Inspector General for Evaluation and Inspections in the 

New York regional office, and Meredith Seife, Deputy Regional 

Inspector General. 

Judy Kellis served as the team leader for this study. Other principal 

Office of Evaluation and Inspections staff from the New York regional 

office who contributed to this report include Lucia Fort and Iris Lin; 

central office staff who contributed include Kevin Farber, Doris 

Jackson, and Barbara Tedesco. 

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