Senate bill could spur shared equipment usage

July 1, 1992

Hospitals looking to form equipment-sharing agreements with otherfacilities but wary of antitrust litigation could get some relieffrom a bill under consideration in the U.S. Senate. The Senate bill is modeled on state legislation in Maine thatcreates a

Hospitals looking to form equipment-sharing agreements with otherfacilities but wary of antitrust litigation could get some relieffrom a bill under consideration in the U.S. Senate.

The Senate bill is modeled on state legislation in Maine thatcreates a legal framework within which hospitals can share serviceswithout fear of antitrust prosecution. The state law, billed asthe first of its kind in the country, takes effect this week.

The hope behind both legislative efforts is that greater sharingof equipment by hospitals would reduce overutilization and improveaccess to services in rural areas. Like other attempts to trimU.S. health-care costs, greater use of shared services would likelydampen demand for new equipment.

The federal bill is entitled the Hospital Cooperative AgreementAct (S. 2277) and would provide funds for 10 demonstration projectsin which hospitals would share big-ticket, high-technology equipmentsuch as CT and MRI scanners. The aim of the bill is to slow the"high-tech medical arms race" in the health-care industrythat contributes to spiraling costs, said Sen. William Cohen (R-ME),sponsor of the legislation.

"Every hospital in America wants to have the latest high-techmachinery and sophisticated hardware, and then must make surethat the equipment is in constant use in order to pay for it,"Cohen said in a speech presenting the bill.

Allowing hospitals to share equipment would help them save moneyand improve health care by creating "more rational health-caresystems built around the needs of the community, not the needsof the provider," Cohen said.

Although the bill would provide funding to encourage technologysharing, its most important provision is an exemption from antitrustlaw for hospitals participating in the demonstration projects,according to an aide to Cohen. Many hospitals fear that equipment-sharingagreements could prompt allegations of price-fixing, which inturn could lead to antitrust litigation, the aide said.

The bill would allocate $2.5 million a year from 1993 through1997 for the demonstration projects, three of which would be locatedin rural areas. Each grant would be for a five-year period andcould not be used for the purchase of capital equipment.

The secretary of Health and Human Services, together with theadministrator of the Agency for Health Care Policy and Research,would award the grants.

Participating hospitals would be given considerable leeway insetting up the projects, with equipment based on-site, at freestandingcenters or in mobile units. Project funding could be used fortraining, transportation and administrative costs.

At the end of the demonstration period, a report would be writtenon the extent to which the projects contained health-care costs,increased access to services and improved the quality of care.Legislation to apply the concept on an industry-wide basis couldfollow if the projects are successful.

The bill is currently in the Senate Labor and Human ResourcesCommittee. Cohen is gathering co-sponsors while looking for alegislative vehicle to which it can be attached, such as a broaderhealth-care bill that is likely to pass, according to the aide.

Industry groups are still developing positions on the bill. TheAmerican Hospital Association worked with Cohen in drafting thelegislation and is a strong supporter.

"In order to reform the (health-care) system we must makeit possible for hospitals to lower the cost and improve the qualityof health care through cooperation," said Dona DeSanctisof the AHA. "Antitrust reform is an essential building blockto health-care reform."

The Health Industry Manufacturers Association is still examiningthe bill and does not yet have a position on it, according toa HIMA spokesperson.

"At this point it may present some interesting ideas,"the spokesperson said.

Cohen's legislation is based on Maine's Hospital Cooperative Act,which became law June 30. The law directly addresses the antitrustissue by setting up a legal framework to guide development ofcooperative agreements.

Hospitals that wish to share services submit an application tothe state attorney general's office and the department of humanservices, and also take part in public hearings. If the applicationis approved, the hospitals receive exemptions to the state's antitrustlaws.

The law was passed to help hospitals overcome difficulties inproviding health care to rural areas in Maine, according to JimHarnar, director of communications for the Maine Hospital Association.

Maine is already home to several cooperative agreements. In onearrangement, the state's only lithotripter has been installedon an 18-wheeler to run a circuit between hospitals. In another,critically ill newborns and infants are transported from hospitalsto Maine Medical Center, which has the only level III neonatalintensive care unit in the state.

"There's wide acceptance that hospitals need to cooperatemore to preserve access in rural parts of the state," Harnarsaid. "It's increasingly hard for a hospital to go it aloneand have the resources to bring in the equipment it needs."