Lawmakers mull lifting ban on physician-owned hospitals as doc lobbying groups claim major cost savings

A new analysis backed by doctor lobbying groups suggests that physician-owned hospitals could have fueled about $1.1 billion in savings across 20 of Medicare’s most expensive conditions in 2019— though the hospital industry is sticking firm to its stance that the broadly restricted facilities are a detriment to the U.S. healthcare system.

The technical report (PDF), commissioned by the Physicians Advocacy Institute and The Physicians Foundation but conducted by researchers from UConn Health and Loyola University Chicago, concluded that the Medicare program and its beneficiaries’ total payments at traditional hospitals would have been 8.6% and 15.2% (depending on the condition) lower if reimbursed at the same rate as a POH.

It also found that patient demographics and comorbidity levels were very often statistically similar among POHs and traditional hospitals in the same hospital referral region—a counter to the hospital industry’s assertions that POHs often selectively treat patients that are healthier and less costly.

“Our results suggest that POHs may offer an opportunity to achieve considerably lower costs of care across a range of health conditions and patient populations,” the report’s authors wrote.

The findings come as lawmakers consider legislation that would unravel the ban on new POHs imposed in 2010 alongside the Affordable Care Act.

It was entered into the record Thursday during a House Committee on Energy and Commerce hearing that discussed the ban and other physician concerns including site-neutral payments and updates to the Medicare Physician Fee Schedule.

Following an early recess due to ongoing discussions on the floor to elect a new speaker, Rep. Michael Burgess, M.D., R-Texas, who is co-chair of the GOP Doctors Caucus, highlighted his work on a discussion draft that would permit new or expanded POHs as long as they are at least 35 miles from an existing hospital or critical access hospital.

“This is a draft, and I’m working on a few technical changes,” he said during the hearing. “I think this solution allows physicians to maintain activity in the business of healthcare while providing patients access to the care they need [and] will allow doctors to be able to afford to stay in practice when they have so many things working against them.”

Burgess’ approach was supported by two of the hearing’s witnesses: Steven Furr, M.D., president-elect of the American Academy of Family Physicians, and Debra Patt, M.D., executive vice president of Texas Oncology. It also drew tentative praise from a fellow committee member from the other side of the aisle.

“I agree somewhat with some of the comments my colleague made,” Rep. Tony Cárdenas, D-California, said immediately after Burgess yielded his time. “It seems in this country you can be a lawyer and own the practice, the law firm, but if you’re a doctor you can’t own the hospital. Gosh, it sounds like we trust lawyers more than doctors in this country. … Hopefully we can get to some good policy on that.”

The debate over POHs has flitted in and out of lawmakers’ healthcare policy discussions during recent months. Critics of the ban say that limiting new entrants is hampering market competition, especially as health systems consolidate other providers and wield increased power.

In June, supporters touted a JAMA Network Open analysis of 156 POHs and 1,116 non-POHs that found median commercial negotiated and cash prices to be roughly a third lower at POHs in the same hospital referral region as a non-POH.

The latest analysis reviewed 186 POHs, 1,230 non-POHs and data from 650,386 discharges. The latter were collected from a data set of 2019 Medicare inpatients that included cost and patient characteristics information.

“Physicians are in the best position to make decisions with and for their patients, so it’s not surprising that Congress is considering allowing new physician-owned hospitals that align the interests of ownership and practicing physicians to improve patients’ care,” Michael Darrouzet, vice president and board director of the Physicians Advocacy Institute, said in a Thursday release. “Now, Congress has another reason to act. Hospitals owned by physicians promise significant cost savings when it comes to Medicare patients’ most expensive medical conditions. Better quality and notable cost savings to patients and taxpayers is a clear signal that physician-owned hospitals is a policy worthy of adoption.”

Hospital lobbyists push back on 'false, theoretical arguments'

The report and congressional hearing come shortly after a contrasting joint op-ed from American Hospital Association Executive Vice President Stacey Hughes and Federation of American Hospitals President and CEO Chip Kahn.

Penned Wednesday, the post evoked the ban’s original intent to prevent physician self-referrals to hospitals in which they have an ownership interest, referred to as the “whole hospital” loophole of the Stark Law. They also said suggestions that POHs would reduce consolidation in healthcare markets are “entirely flawed” due to the stronger influence commercial insurer policies and private equity firms have on practices.

The hospital lobbyists capped their argument by reasserting claims that POHs “cherry-pick” their patients, do not improve quality and increase spending for the federal government—and cited a slew of reports from consultants, the Medicare Payment Advisory Commission, the Office of Inspector General and the Congressional Budget Office.

“It is therefore imperative that we maintain the current law, which protects the Medicare program from expansion of POH practices, and not roll-back protections under false, theoretical arguments,” Hughes and Kahn wrote.