Wall Street Journal Examines Profitable South Dakota Specialty Hospital
The Wall Street Journal on Tuesday profiled a South Dakota neurosurgeon who founded a specialty hospital in 1997 and made $9 million when it went public last year. Larry Teuber and 38 other investors -- 34 of whom are doctors -- received a total of $37.6 million in profit distributions and an additional $65 million in stock when they went public with their Rapid City, S.D, specialty hospital, Black Hills Surgery Center.
The number of total outpatient surgeries in Rapid City has doubled since the specialty hospital opened. Officials from Rapid City Regional Hospital, the city's not-for-profit general hospital, say the surgery center has "siphoned away healthier -- and more profitable -- patients," the Journal reports.
Congress in 2003 imposed an 18-month moratorium on construction of new specialty hospitals after the American Hospital Association raised concerns that they were "cherry-picking the most profitable patients," according to the Journal. Lawmakers are debating whether to extend the ban, which expired June 8.
Teuber and others in the specialty hospital industry say their facilities provide better care than general hospitals because they focus on a select number of procedures. Meanwhile, RCRH posted an $8.3 million loss last year, and some of its doctors and administrators have criticized Teuber for his "bare-knuckles strategy," the Journal reports.
Teuber, who defends his practices, said, "Most doctors don't know how to run a business or how to compete. They don't know how to step away from the emotion of it."
RCRH surgeon Robert Ferrell said the surgery center "has spelled the end of any true collegiality in the Rapid City medical community."
According to the Journal, the success of Black Hills and the rest of the nation's roughly 100 specialty hospitals "illustrates how many doctors, feeling squeezed by health insurers and malpractice-insurance premiums, have found new ways to prosper" (Armstrong, Wall Street Journal, 8/2).