Major hospital groups are ramping up resistance to physician-owned hospitals, which were checked by the Affordable Care Act but have recently become subject of renewed attention.
Physician-owned hospitals have been largely quiet in conversations about hospitals over the past decade-plus due to the Affordable Care Act. Enacted in 2010, the law placed a number of restrictions on POHs, including a prohibition on expanding the capacity of existing Medicare-certified POHs unless they meet certain exceptions and a moratorium on the establishment of new Medicare-certified POHs.
In December 2022, POHs regained some industry attention when CMS granted a "high Medicaid facility" expansion request from Edinburg, Texas-based Doctors Hospital at Renaissance to establish a new physician-owned hospital 55 miles away in Brownsville.
The Federation of American Hospitals, which represents investor-owned hospitals, heavily criticized the development as unlawful and argued that the 55-mile distance between DHR's main campus and new location makes it "a thinly veiled attempt to set up a new POH in a new service area."
Shortly after that development, in February, more than a dozen Republican lawmakers reintroduced legislation that would repeal the ACA's ban on POHs. The bill, dubbed the Patient Access to Higher Quality Health Care Act, received support from the American Medical Association and Physician-Led Healthcare for America.
"The hospital industry has long argued that physicians cherry-picked healthy patients and preferred those with private insurance as a rationale for supporting the ban on physician-owned hospitals," legislation co-sponsor Sen. James Lankford, R-Okla., co-authored with an assistant professor of Medicine at the Johns Hopkins University School of Medicine in an op-ed for The Wall Street Journal, likening the ban on physician-owned hospitals to the absurdity of a ban on chef-owned restaurants.
Now, a new report jointly issued by the FAH and American Hospital Association reasserts the idea that POHs cherry pick. The March 23 report, prepared by health economics and policy consulting firm Dobson DaVanzo & Associates, suggests POHs are outliers compared to their non-POH counterparts due in large part to their patient populations and acuity.
Based on an analysis of 163 POHs and 3,020 non-POHs, the report contends that POHs generally treat a population that is younger, less complex or comorbid, and less likely to be dually eligible or non-white, the report states. They also have higher margins and lower unreimbursed and uncompensated care costs as a percent of net patient revenue compared to non-POHs.
"If there was ever any doubt, the evidence against POHs is as crystal clear today as it was when Congress passed the self-referral ban in 2010," FAH President and CEO Chip Kahn said in a statement. "Weakening or unwinding the current ban opens the door further to the very behaviors that Congress sought to prevent."
"The growth of physician-owned hospitals was restricted by Congress for good reasons and those remain valid today as this analysis shows," AHA President and CEO Rick Pollack said in a statement. "Physician-owned hospitals undermine our nation's health care safety-net and jeopardize access to care by cherry-picking the most profitable cases and avoiding patients with complex conditions and lower-reimbursing coverage."