Public Policy Regarding Specialty Hospitals

Why do we need “public policy” regarding specialty hospitals? What is the rationale for government involvement in decisions by the private sector to invest in specialty hospitals? Two possibilities are reduced access to services primarily by the uninsured (a fairness concern) and changes in the types of patients receiving care resulting from poor consumer information (an efficiency concern). The fairness argument faces logical and empirical difficulties, and even if it proved to be true, it is not clear that limiting the growth of specialty hospitals would be an efficient way to address the problem. However, there is some empirical evidence to support the efficiency concern, and if specialty hospitals result in the treatment of patients with lower expected net benefits from treatment, then it is possible that physician-owned facilities could result in an increasingly inefficient allocation of health care resources, higher insurance premiums, and higher rates of uninsurance.