Interim Physicians Blog

Dr. Ken's Corner: Battle Brewing Over Ban on Physician-Owned Hospitals

Posted by Ken Teufel M.D. on Mar 28, 2018 12:00:00 PM

83288243_xxl.jpgIn 2010, physician-owned hospitals experienced a major setback.  That's when the Affordable Care Act banned the construction of new physician-owned hospitals and restricted the expansion of existing POH facilities.  Recently the debate over the pros and cons of POHs resurfaced with the introduction of House and Senate bills calling for a repeal of the ban.

As it stands today more than 250 U.S. hospitals are partially or completely owned by physicians.  This accounts for about 5% of all U.S. hospitals.  The current law prohibits physicians from referring Medicare or Medicaid patients to any hospital where they have an ownership share if the hospital was built after December 31, 2010.  In addition, the law prohibits a POH from increasing the percentage of physician ownership, plus a POH is restricted from increasing the number of beds, procedure rooms, or operating rooms beyond what was in place as of March 23, 2010.

As would be expected, system-owned and public, non-profit hospitals want to keep the POH ban in place.  They complain that POHs "cherry pick" healthier, better-paying patients and turn away non-paying patients and those whose payment plans have lower reimbursement rates, such as Medicare and Medicaid.  The American Hospital Association and the Federation of American Hospitals don't want the ban lifted.

On the other hand, the American Medical Association and Coalition of State Medical Societies strongly support removing the ban.  They argue that it's been shown that the quality of care provided at POHs is equal to or better than that of non-POH hospitals (CMS, 2017), and that lifting the ban on POH hospitals will bring badly needed competition to the marketplace.  They also argue that lifting the ban will increase physician involvement in hospital governance and decision-making, thereby streamlining operational costs and processes (haynesboone.com, 2017).  

Debating the pros and cons of POHs is part of a long-standing feud.  In 2008 (before the POH ban went into effect), Molly Sandvig, former executive director of Physician Hospitals of America said: "The arguments [against POHs] are basically excuses to try to prove the evils of physician ownership.  The real issue is one of control and competition" (mdmag.com).

A study of orthopedic specialty hospitals concluded that orthopedic surgeons are more likely to perform more procedures when they have an ownership stake in a facility, compared to surgeons who have no ownership in the facility (Archives of Surgery, 2010).  This study "suggests that financial incentives linked to ownership of either specialty hospitals or ambulatory surgery centers influence physicians' practice patterns."

Another study, one of the largest and most comprehensive to date, is a Harvard University study that included 219 POHs, comparing them to non-POHs on various parameters (Blumenthal, et.al., BMJ, 2015).  Findings from this study "suggest that any self referrals that did occur were modest and did not result in substantial differences in outcomes for patients at POHs and non-POHs, or their proportions of patients from ethnic and racial minority groups and those using Medicaid."  The Harvard researchers suggest that this departure from earlier studies "may stem from our inclusion of all POHs, rather than specialty POHs, the focus of almost all previous studies of POHs."  Their conclusion: "These findings indicate a need to re-examine existing public policies that target all hospitals with physician owners."