Physician-owned hospitals kindle competition, but may be nixed

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A clause under the Patient Protection and Affordable Care Act (PPACA) would eliminate the future expansion of physician-owned hospitals, curbing healthy competition and possibly diminishing access to patient care, according to an August policy perspective by the Texas Public Policy Foundation.

Currently there are nearly 260 specialty hospitals throughout the United States, with 25 percent of them in Texas alone. And while these types of hospitals generally help to boost the local economy, employ full-time employees (FTEs) and foster competition, those who oppose physician ownership have two major complaints:

  • Physician-owned hospitals draw less-complicated, more profitable patients away from general hospitals, which ultimately lowers earnings; and
    • Physicians are interested in becoming owners of hospitals for the financial gain. The data, however, suggests that they do so because of their “dissatisfaction with the quality of care, efficiency, and bu­reaucracy of the community hospital.”

    Under Section 6001 of the PPACA, physician-owned hospitals are banned from becoming Medicare-certified after last year, which blocks any increase in the percentage of physician ownership in existing Medicare-certified hospitals and limits the expansion of existing Medicare-certified physician-owned hospitals, according to the paper.

    Because there are more physician-owned hospitals in Texas than anywhere else in the United States, Texas will be harder hit by these regulations. A 2009 Health Economics Consulting Group study showed that physician-owned hospitals in Texas contribute nearly $2.9 billion in economic activity to the state per year. Texas physician-owned hospitals employed 22,226 full-time employees, compared to states such as Ohio, which employed 2,765 FTEs.

    “The impact of the PPACA is not just economic; it also affects the quality of care delivered to Texans,” the paper stated. “POHs are vital to Texas’ economy and ability to deliver quality healthcare to our citizens, but the new healthcare law puts all of that in jeopardy.”

    Community hospitals that are in direct competition with physician-owned hospitals attempt to improve their own care and improve operations, according to a recent study by the Medicare Payment Advisory Commission (MedPAC). Physician-owned hospitals also may provide better quality of care and may be run more efficiently when compared to community hospitals, according to the paper.

    In fact, a Centers for Medicare & Medicaid Services (CMS) report recently showed that specialty hospitals perform better than general hospitals in terms of complication rates, particularly in areas involving anesthesia and hip fracture.

    The center called the restrictions within the legislature “akin to the unconstitutional taking under the Fifth Amendment of the U.S. Constitution.

    “It is not the POHs that cause the community hospitals to lose their most profitable cases and physician ownership does not induce overutilization of services,” the center added. “Rather, the real problem is the complex and confusing healthcare payment system.”

    The rapid growth of POHs conveys the market competition. “Thus, the real losers in the restrictions against physician-owned hospitals are the patients who need healthcare and the taxpayers who are increasingly footing the cost of healthcare in America,” the foundation concluded.