Physician-owned hospitals: Are they the boogeyman?


Folks, before you hit that "compose e-mail" button, let me say that nobody needs to give me a lesson on the problems that can arise when physicians operate or own a substantial part of a hospital. In particular, I'm convinced that it's important to keep an eye on the issue of physician self-referral, given the myriad of problems that occur when anyone, physician or otherwise, has an incentive to put making money over patient interest.

That being said, I thought you might be interested in a recent column by Molly Sandvig, JD, the executive director of trade group Physician Hospitals of America. (OK, I can hear the hospital execs in the audience saying "Boo! Hiss!" Calm down, guys...)  In her recent piece, for financial publication Inside ARM, Sandvig offers a few observations and stats that are worth reviewing:

* Health system investment in physician practices, with the assumption that the practices will refer to systems' hospitals, is a form of self-referral

* Physician hospitals generate a net community benefit almost 8 times higher than non-profit hospitals, averaging 7.23 percent as opposed to .87 percent for non-profit hospitals

* Physician-owned hospitals are more agile because they're smaller, and higher quality because they're run by clinicians

* Despite popular perceptions, utilization and costs don't rise just because a physician hospital appears in a market

Of course, one can raise many questions in response to her arguments--though in all honesty, I think she may have a point when it comes to vertical integration by health systems. For one thing, maybe one physician hospital doesn't move the needle on utilization, but what happens when several enter a market or even dominate it? What evidence is there that physician hospitals offer higher quality? How does she define "net community benefit"? Can she really suggest with a straight face that specialty hospitals' CEOs focused on high-margin elective procedures are propping their doors open to accept uninsured folks? And so on.

What questions would you ask Ms. Sandvig, readers? And do you agree with any of her arguments? I'd love to hear from you. Please feel free to write to me and let me know what you think. - Anne

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