Physician-Owned Hospitals Deliver Quality and Value


The Obama administration doesn’t like capitalism. They believe government delivers better quality than the private sector. Anyone who has ever tried to get the IRS on the phone, or tried to enroll in ObamaCare knows better.

There’s a reason why more and more surgery is being done in privately owned ambulatory surgery centers. They do a better job at a lower cost to the patient and the healthcare insurer.

Unfortunately, ObamaCare doesn’t’ allow this when it comes to hospitals. The Affordable Care Act bans building new or expanding existing physician-owned hospitals. This makes sense only if you want higher-cost, lower-quality healthcare.

Why does the ACA ban new construction of physician-owned hospitals?

The ACA was developed in close cooperation with the major stakeholders in the healthcare industry. That means hospitals, pharmaceutical companies, and healthcare insurers. The hospital associations are dominated by large non-profit general hospitals that must compete with smaller physician-owned hospitals (POHs).

In a move to stifle the growth of these for-profit physician-owned hospitals, the hospital associations accused the POHs of “cherry picking” the most profitable patients and failing to deliver their share of indigent care. They successfully lobbied the Obama administration into punishing the POHs that violate the new construction ban by prohibiting their participation in Medicare and Medicaid.

This makes new private construction of POHs financially impossible. More than 40 major expansion projects at existing hospitals were halted as a direct result of the ACA ban, according to Grace-Marie Turner of the Galen Institute.

Physician-owned Hospitals are Better

But now come statistics that refute the commonly-held beliefs about these physician-owned hospitals (POHs). It seems that physicians are very good not only at treating patients but also at providing healthcare facilities that are efficient.

  • Seven of the top 10 hospitals receiving quality bonuses in the Hospital Value-Based Purchasing Program in 2015 were POHs. This is remarkable since less than 5% of the 5,700 hospitals nationwide are POHs.
  • The Centers for Medicare and Medicaid Services (CMS) released Star Ratings in 2015 based on consumer assessment survey. More than 40% of POHs received the top 5-star rating compared to only 5% of general hospitals.
  • The Department of Health and Human Services found that patients are 3 to 5 times more likely to experience complications at general hospitals than at physician-owned specialty hospitals.


Physician-owned Hospitals are Cheaper

Contrary to the claims of their competition, these POHs often are cheaper than general hospitals. An analysis by Avalon Health Economics said that POHs are saving Medicare $3.2 billion over 10 years. For that reason alone you would expect the federal government to want more, not less, of these hospitals.

They also provide more charity care, not less, than non-profit hospitals, which receive subsidies and tax exemptions. A CMS study found that POHs spend nearly 6% of their total revenue on community benefits compared to less than 1% for other hospitals.

Furthermore, a major study was published in The British Medical Journal this year that found patients at POHs and non-POHs were equally likely to have Medicaid insurance and to be from racial or ethnic minority groups. The study also concluded: “POHs also performed equally to non-POHs on a wide array of measures of quality of care, costs, and payments for care.”

Why does the Obama administration want to ban these hospitals?

Crony capitalism – government picking winners and losers based on their political support. ObamaCare is the largest example of crony capitalism in our government today.

The large community hospitals have more clout with politicians because they are almost always a major employer in their states and districts. These hospitals make false claims to influence their political friends and thereby diminish the competition they have with POHs. These non-profit hospitals may not have stockholders, but they still want to be the biggest and most influential healthcare providers in town.

The American Medical Association has taken up this issue by endorsing legislation introduced by U.S. Representative Sam Johnson (R-TX), H.R. 2513, that would suspend the moratorium on POH expansion for three years and grandfather in several POHs that were already under development when the ACA passed in 2010.

The AMA statement in support of this legislation states:

“Limiting the viability of physician-owned hospitals reduces access to high-quality health care and has a destructive effect on the economy in communities these hospitals serve,” said AMA Executive Vice President James L. Madara, M.D. “Physician-owned hospitals also represent the type of coordinated care being proposed for the future of health care delivery.”

The real solution, however, is to repeal and replace ObamaCare with market-driven healthcare that gives consumers freedom of choice and allows the best hospitals and doctors to succeed by providing the best quality care at the lowest prices. To accomplish that we need a Republican president in the White House in 2017.

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