Physician-owned general acute care hospitals charge less than other non-physician-owned facilities in their region for several common shoppable care services, according to a new analysis published Friday in JAMA Network Open.
The review, which looked at a sample of 156 physician-owned hospitals (POHs) and 1,116 non-POHs, 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, researchers wrote in the journal.
Of note, those POHs also tended to be for-profits with, on national-level average, larger profit margins and a third of the beds. They also served significantly fewer Medicaid patients and had lower charity-care-to-expense ratios, potentially implying that POHs have fewer low-paying patients they would need to offset with higher prices.
“The Affordable Care Act (ACA) imposed severe restrictions on physician-owned hospitals, such as prohibiting the development of new physician-owned hospitals and the expansion of existing ones,” Ge Bai, a professor of accounting and health policy at Johns Hopkins University and one of the coauthors of the study, said. “Our study suggests that these hospitals actually deliver care at lower prices, instill competition to the hospital market, and expand patient access to hospital care.”
Bai and colleagues limited their analysis to POHs in hospital referral regions that contained at least one non-POH. They used RAND hospital data from 2020, which is based on Medicare Cost Reports, to describe the hospitals’ characteristics. They compared the commercial negotiated and cash prices for eight CMS-designated shoppable services (such as spinal injection and high-level emergency department visits) as posted on the hospitals’ websites on Jan. 13, 2023.
The researchers’ work was supported by a grant from price transparency organization PatientRightsAdvocate.org, which had no role in the study itself. “Most” of the hospitals included in the analysis posted prices for at least one of the eight shoppable services, the researchers wrote, though other potential limitations could include the small number of shoppable services included or missed data from hospitals excluded because they did not post price data.
The findings are likely of interest to legislators and lobbyists grappling with whether or not to lift the ban on new POHs imposed in 2010. Prior to this, the number of PHOs had grown from roughly 67 hospitals in 2000 to about 250 in 2010.
Critics of the ban say that limiting new entrants is hampering market competition, especially as health systems consolidate other providers and wield increased power.
The hospital industry backs the ban and its original intent of limiting facilities that supposedly cherry-pick healthier, privately insured patients. In March, the American Hospital Association and the Federation of American Hospitals released a report that found that POHs had higher margins and lower unreimbursed and uncompensated care costs.
A return of new POHs would be “a financial threat to other hospitals,” but “an attractive option for patients and employers,” Bai said. Though her group’s study spotted these same profit and case mix metrics flagged by the hospital industry, she said the current playing field “is unfairly skewed in favor of non-POHs” and ripe for policymaker intervention.
“Congress should establish a level playing field that allows all hospitals to compete, leading to lower prices for all Americans,” she said in an email.