Ending the Specialty Hospital Wars: A Plea for Pilot Programs as Information-Forcing Regulatory Design

This chapter focuses on the need for more targeted assessment of the impact of market forces on communities. Pilot programs encourage experimentation in the delivery system without risking widespread disruption of care for the uninsured and emergency services. The Center for Medicare & Medicaid Services (CMS) has already embraced the idea of pilot programs in other contexts, and they could be especially appropriate if specialty hospitals were permitted in markets where general hospitals had a demonstrably poor record of community service. In such markets, cross-subsidization is probably already low, and specialty hospital threats to it are not as much of a concern as they are in areas where general hospitals consistently serve a substantial base of indigent and uninsured patients. Part II of the chapter makes the case for pilot programs by laying out basic facts about the current performance of specialty hospitals. Part III describes the increasingly complex legal landscape surrounding them—including directly applicable provisions of state and federal laws, and incumbent hospitals\u27 strategies to deploy other regulations, statutes, and common law to gain competitive advantage. After briefly describing the drawbacks of all these strategies, Part IV advances the positive contribution of the chapter: a turn to pilot programs that would promote an evidence-based response to the rise of specialty hospitals