Bipartisan House bill would allow new rural physician-owned hospitals, permit expansions

A bipartisan quartet of House representatives have introduced a bill peeling back restrictions on new or expanded physician-owned hospitals.

The Physician Led and Rural Access to Quality Care Act, brought late last week, would create an exception to an Affordable Care Act’s ban that aimed to reduce conflicts of interest in care. Specifically, it would permit new physician-owned hospitals to open in rural areas that are at least 35 miles from another existing hospital or critical access hospital (or 15 miles in difficult-to-traverse areas).

The new bill would also sunset a prohibition on expanding any existing physician-owned hospitals.

“The [bill] will enable physicians to continue practicing medicine through physician ownership and support the expansion of existing hospitals in rural communities,” Rep. Michael Burgess, M.D. (R-Texas), one of the four supporting legislators and a frequent critic of the ban, said in a statement. “Having owned my own practice, I understand the critical importance of affordable healthcare prices and timely access to high-quality care. I am honored to lead this bipartisan legislation with my fellow members to ensure that rural patients across America receive the care they need."

Cosponsoring the bill were Reps. Tony Cárdenas (D-California), Morgan Griffith (R-Virginia), and Vicente Gonzalez (D-Texas). A release announcing its introduction included supportive comments from physician professional groups like the American Medical Association, the American Association of Orthopaedic Surgeons and Physician-Led Healthcare for America.

The policy debate over whether or not to relax physician-owned hospital restrictions centers on increasing competition and reducing healthcare prices. Opening the door to these ownership structures has been broadly supported by physician organizations but opposed by hospital groups, which argue that physician-owned hospitals tend to “cherry-pick” patients with greater coverage and leave the burden of high-cost care to other hospitals and the government.

One study published last summer found that a sample of 156 physician-owned hospitals (established before the ban) had median commercial and negotiated cash prices roughly a third lower than other hospitals in the same hospital referral region. Another technical report from last October—conducted by academics but commissioned by the Physicians Advocacy Institute (PAI) and The Physicians Foundation—found that Medicare payments for beneficiaries’ care would have been 8.6% to 15.2% lower if reimbursed at the same rate as a physician-owned hospital.

“Healthcare consolidation and the hospital closures that have resulted have left millions in rural areas without access to needed care,” Michael Darrouzet, vice president of PAI and executive vice president/CEO of the Texas Medical Association, said in a statement released Tuesday. “The expansion of physician-owned hospitals is a crucial step towards restoring access to health care for everyone in the United States, regardless of their ZIP Code.”

Hospital industry groups like the American Hospital Association and Federation of American Hospitals, meanwhile, often point to consulting firm data outlining the aforementioned cherry-picking and worse quality measures. They also cite Congressional Budget Office data suggesting that erasure of the “whole hospital” exception loophole in the Stark law cut the federal deficit by half a billion dollars over a decade, and argue that the lifted restriction would do little to hinder providers’ consolidation arms race against payers.

Lisa Kidder Hrobsky, AHA's senior vice president of federal relations, advocacy and political affairs, touched on each of those points in an emailed statement outlining the "unfettered growth" of physician-owned hospitals the bill would permit. 

"The AHA strongly opposes expansion of [physician-owned hospitals] by either creating new categories of exceptions or allowing existing [physician-owned hospitals] to expand," she said. 

Burgess, who is co-chair of the GOP Doctors Caucus and set to retire at the end of the term, has had the ban in his sights for some time. He’s floated the restrictions outlined in the new bill during multiple recent hearings on healthcare prices and competition.

In a May hearing, Burgess questioned Congressional Budget Office Director of Health Analysis Chapin White on whether lifting the ban would lead to lowered costs. White responded that his nonpartisan agency recognized that the policy change could have an impact on competition but expects a concurrent rise in federal spending due to increased utilization.

“Can you provide us the models that you’ve used to make those assumptions?” Burgess responded at the time. “Because I think they’re fundamentally wrong, and I would be happy to debate that with facts but not ‘what we expect would happen.’ I’d like to see actual numbers on that.”