Specialty Hospitals, Except Psychiatric

SIC 8069

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in providing hospital services for specialized categories of patients, except for the mentally ill (see SIC 8051: Skilled Nursing Care Facilities and SIC 8063: Psychiatric Hospitals. Hospitals in this industry classification include facilities that treat alcoholism and drug addiction, cancer, children's illnesses, chronic disease, maternity, orthopedic, and tuberculosis.

Industry Snapshot

Establishments in this industry provide hospital services for patients who have usually already seen a physician at a general hospital or medical office. This industry, as part of the broader health care industry, recorded overall growth throughout the twentieth century, with certain areas experiencing distinct growth in the first years of the twenty-first century. Specific specialty hospitals, such as those treating cancer and addiction, grew in response to the increase in the number of people diagnosed with these ailments. Conversely, maternity hospitals decreased in number as technology and social change brought about an increase in birthing facilities at general hospitals.

during the first decade of the 2000s, these hospitals, like other establishments in the larger health care industry, were faced with cost-cutting measures resulting from economic factors and anticipated government reforms targeted at health care. Nevertheless, in 2011 specialty hospitals generated revenues of approximately $36 billion.

Organization and Structure

Several distinct types of hospitals are classified in this industry group, each with a unique history and status. Like other hospitals, specialty hospitals are either nonprofit or for-profit and have competition from government-owned hospitals. The U.S. government owned the vast majority of tuberculosis and chronic disease hospitals in the United States. Alcohol and drug abuse rehabilitation hospitals and cancer hospitals tended to fall under private ownership.

Specialty hospitals include both long-term and acute (short-term) facilities. Long-term specialty hospitals (where patients usually stay for 30 days or more) include alcohol and drug abuse rehabilitation hospitals, physical rehabilitation hospitals, chronic disease hospitals, and cancer hospitals. Short-term specialty hospitals (where patients usually stay for 30 days or less) include maternity (obstetric) hospitals and children's hospitals.

Background and Development

The diverse histories and services offered by each hospital type explains the evolution of specialty hospitals.

Tuberculosis Hospitals.
Tuberculosis, an infectious disease that usually affects the lungs, was the leading killer of Americans at the beginning of the twentieth century. This disease, also referred to as consumption, gave rise to hundreds of sanitariums in the early 1900s. It was thought that rest and isolation, along with treatments using temperature extremes, were ways of curing the disease. It was not until the 1940s that antibiotics were used successfully to cure the disease, turning many of the sanitariums into tuberculosis hospitals. Preventive treatments were developed and during the 1950s hundreds of tuberculosis hospitals in the United States closed.

In 1985 the federal government reduced funding for preventive treatments, thinking that tuberculosis was under control. In the 1990s, however, documented cases of tuberculosis began to rise again for the first time in more than 50 years. At that time, there were reportedly only four tuberculosis hospitals in the United States. These facilities accounted for 470 beds and had a 66.4 percent occupancy rate, providing services for more than 16,800 non-emergency outpatient visits. (These hospitals did not provide emergency services.) As of 2012, A.G. Holley State Hospital in Lantana, Florida, was the only free-standing tuberculosis hospital remaining in the United States.

Maternity Hospitals.
In 2012 there were 12 maternity hospitals that were members of the Council of Women's and Infants' Specialty Hospitals and were accountable for 120,000 deliveries annually. The number of birth centers grew 20 percent between 2007 and 2011, according to the American Association of Birth Centers, which in 2011 reported 215 institutional members.

Ear, Nose, and Throat Hospitals.
Most eye, ear, nose, and throat hospitals were contained within a greater hospital structure. In 2011 U.S. News & World Report listed over 1,400 in its annual review of the 50 top programs. The report named as the top five in this category as Johns Hopkins Hospital, Baltimore; Massachusetts Eye and Ear Infirmary, Boston; University of Pittsburgh Medical Center; Mayo Clinic, Rochester, Minnesota; and University of Iowa Hospitals and Clinics, Iowa City. In 2009 there were 73 stand-alone facilities, with 4,747 employees and $581 million in annual revenues.

Rehabilitation Hospitals.
Rehabilitation hospitals provide medical services for patients suffering from physically debilitating ailments, usually as a result of an injury. Most patients admitted to these establishments suffered from head or traumatic spinal cord injuries. More than 240 rehabilitation hospitals maintained operation in the United States at the end of the first decade of the 2000s.

Rehabilitation centers dedicated to the treatment of addiction were seriously challenged in the mid-1990s with the rise of managed care insurance programs. Managed care plans in general afforded their members little or no coverage in the area of substance abuse and addiction treatment, and hospitals that specialized in the treatment of these ailments suffered subsequent loss of revenue. "The number of inpatient treatment programs has declined precipitously," Monica Oss, editor of the behavioral health industry newsletter, Open Minds, told Time. Oss continued, "Between 1988 and 1993, the average number of patient bed days dropped from 35 to 17." Rehabilitation facilities reacted by offering a variety of treatment options, including outpatient therapy.

Orthopedic Hospitals.
There were 170 orthopedic hospitals in operation in the United States at the end of the first decade of the 2000s. These facilities treated patients with physical deformities, who often were children. These hospitals employed 7,372 and generated revenues of $231 million.

Chronic Disease Hospitals.
There were approximately 60 chronic disease hospitals operating in the United States in the 1990s. They employed about 6,500 workers and generated $213 million in revenues. These hospitals most commonly provided long-term inpatient care facilities for patients with chronic illnesses, such as chronic respiratory infections. Chronic disease hospitals do not treat cancer and tuberculosis patients.

Children's Hospitals and Cancer Hospitals.
Other leading specialty hospitals in the United States were children's hospitals and cancer hospitals. Both not only were on the cutting edge of treatment and service for their patients, but they also were often highly involved in ongoing research and development of new treatment and medical advances.

Controversy at the End of the First Decade of the 2000s.
Although specialty hospitals had been around for a while, they played a somewhat controversial role in some communities at the end of the first decade of the 2000s. They tended to have a competitive edge over traditional community-based hospitals because they could boast of shorter stays and lower mortality rates. However, a 2009 study that was reported in NewsRx Health accused specialty hospitals of "cherry picking" easy-to-treat patients. In addition, specialty hospitals primarily admitted only patients who could pay for services. At the same time, community hospitals, which were losing paying customers to these specialty facilities, continued to fill their beds with nonpaying and low-paying Medicare and Medicaid patients. According to the American Hospital Association, specialty hospitals could earn profits up to 10 times the national average by providing services only for the most profitable procedures, treating only patients with the ability to pay, and treating only the least sick patients.

However, Modern Healthcare reported that a previous study conducted in March 2009 by the Center for Studying Health System Change found that in an examination of three markets, specialty hospitals did not take revenue from coexisting community hospitals. While specialty hospital proponents used the study to validate their claim that they provide healthy competition and additional services within a healthy health-care community, others questioned the limited basis for the study.

During the second half of the first decade of the 2000s, there was a rapid expansion of the number of physician-owned limited care specialty hospitals from 123 in 2003 to 262 in 2007. Because of their negative effect on general community hospitals, several legislative attempts were made to limit or remove a physician's ability to refer a patient to a specialty hospital in which that physician had an ownership interest.

In 2009 the largest sectors in terms of numbers firms were alcoholism rehabilitation hospitals (1,856 facilities, 24,666 employees, and $1.2 billion in revenues) and drug addiction rehabilitation hospitals (1,347 facilities, 14,818 employees, and $1.2 billion in revenues). However, in terms of the number of employees and revenues, the largest sector was children's hospitals, with 305 facilities, 96,865 employees, and $5.2 billion in revenues.

Current Conditions

Specialty hospitals continued to be criticized for their quality of care, and were challenged by a shortage of skilled personnel and fluctuating Medicare reimbursement payments. Nevertheless, the industry survived the economic recession that began at the end of the first decade of the 2000s, with revenues rising an average of 3.2 percent a year from 2006 to 2011. According to a study published in the Journal of Health Care Finance in late 2011, the number of specialty hospitals in the United States increased 174 percent between 2000 and 2010. The future of the industry was positive, according to a December 2011 report by IBISWorld that said, "Demand for specialty hospitals will continue to rise over the next five years, driven by an aging population and new technologies."

Industry Leaders

In the early 2010s, Hospital Corporation of America (HCA), owned and operated approximately 163 hospitals and 109 ambulatory surgery centers and other outpatient centers. The company, which employed 199,000 people and was one the largest privately held firms in the United States, reported revenues of $28.4 billion in 2008 and more than $8.3 billion in the first quarter of 2012. As the second-largest hospital chain in the United States, Tenet Healthcare Corporation of Dallas, Texas, cut its holdings from 115 hospitals to about 50 after a number of scandals over billing practices. Tenet reported sales of $8.8 billion in 2011 with 57,000 employees.


According to the U.S. Bureau of Labor Statistics, in 2011 specialty hospitals employed 220,490 people. The distribution of the workforce included registered nurses (RNs) comprising about one-quarter of the total, with aides and orderlies making up 10 percent, and licensed practical nurses (LPNs) comprising around 4 percent. Nonmedical personnel, including maintenance and clerical workers, totaled 17 percent of the workforce.

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