Stakeholders Gird for Battle, as Congress Mulls Lifting Ban on Doc-Owned Hospitals

Physician-advocates say that lifting the ban would provide a counterwight to the ongoing consolidation of traditional hospitals.

Congress is considering lifting a 13-year ban on physician-owned hospitals, and though the odds are long that any action will occur soon amid the chaos in the U.S. House, powerful stakeholders on both sides of the issue are sharpening their talking points.

A discussion draft introduced this month in the House Health Subcommittee would amend the Stark Law’s ban on physician self-referrals for Medicare and Medicaid patients"for certain rural hospitals that are located a certain distance from an existing hospital or critical access hospital."

No action has been taken on the draft, sponsored by U.S. Rep. Michael C. Burgess, R-TX, and it’s not clear if any action will be taken this year. That hasn’t stopped stakeholders on both sides of the issue from pre-emptively offering very different perspectives.

In a joint statement this month, Chip Kahn, president / CEO of the Federation of American Hospitals, and Stacey Hughes, executive vice president of the American Hospital Association, say that the Stark Law was enacted to ensure "a level playing field in the service of higher-quality, more affordable, and improved access to care for patients."

"And, it is why in 2010 Congress closed the law’s 'whole hospital' exception loophole, prohibiting physicians from referring Medicare and Medicaid patients to new hospitals in which they have an ownership interest, and limiting the growth of existing POHs," they say.

The hospital associations say the Stark Law is needed to prevent POHs from "further expanding their practices of selecting the healthiest and most profitable patients, driving up utilization, and deferring emergency services to publicly funded 911 services or general acute care hospitals when their patients need emergency care."

"POHs cherry-pick healthy and wealthy patients, they provide limited emergency services and are ill-equipped to respond to public health crises, and they increase costs for patients, other providers, and the federal government," the associations say.

Docs Fire Back

There are about 240 physician-owned hospitals nationally, and they represent about 5% of the roughly 5,700 hospitals in the United States.

Physician advocates for POHs say that lifting the ban would counter the ongoing and accelerating consolidation of traditional hospitals and offset the rise in physician employment, both of which have increased healthcare costs for consumers.

The American Medical Association and a slew of state physician associations say repealing the POH ban "will inject much-needed competition into the market by allowing physician-owned hospitals to compete."

"Lifting the ban on physician-owned hospitals would allow physicians to open new hospitals as well as acquire existing hospitals, and in doing so implement alternative care delivery and payment models that create efficiencies that benefit consumers while enhancing care," the AMA says.

"Competition created by new or expanded physician-owned hospitals through lower costs or higher quality services—or both—will induce traditional hospitals to upgrade their offerings or risk losing market share. Allowing physicians to acquire hospitals, particularly those in rural areas whose future might be uncertain, would protect access to care that might otherwise be lost."

The POH lobby cites a report commissioned by the Physician’s Advocacy Institute and The Physicians Foundation which estimates that POHs generated $1.1 billion in savings in 2019 compared to traditional hospitals when examining the total cost of care for 20 of the most expensive conditions for Medicare patients.

Physician stakeholders also complain that POHs were unfairly used as a bargaining chip by the Obama administration to gain support for the ACA from the hospital lobby.

"Permitting new physician-owned hospitals could promote desperately needed innovation in care delivery, flexibility in hospital supply during emergencies, and increase competition for physician labor, presenting a counterweight to the existential crisis of our time: burnout and the loss of physician autonomy," the AMA says.

"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," says PAI Vice President Michael J. Darrouzet, CEO of the Texas Medical Association.

"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," Darrouzet says.