Battle over physician-owned hospitals emerging in Washington

While Republican lawmakers are pushing legislation to ease restrictions on physician-owned hospitals, two major organizations representing acute-care hospitals don’t want that to happen.

Republicans in Congress are pushing to ease restrictions on physician-owned hospitals. (Image credit: ©Pierrette Guertin - stock.adobe.com)

The American Hospital Association and the Federation of American Hospitals are both speaking out in opposition to the idea of allowing the expansion of physician-owned hospitals.

In a blog post published this week, the two hospital groups contend that physician-owned hospitals try to avoid treating patients on Medicaid, those without insurance.

Physician-owned hospitals also treat fewer medically complex patients and provide fewer emergency services, leaving it to other community hospitals to handle more patients in emergencies.

Chip Kahn, president and CEO of the Federation of American Hospitals, and Stacey Hughes, executive vice president of government relations and public policy at the American Hospital Association, wrote the post on physician-owned hospitals.

“It is time to face the facts and acknowledge that POHs (physician-owned hospitals) are not good for patients, communities, the integrity of the Medicare program, or providers who are actually in the business of caring for all patients, 24/7, regardless of their ability to pay or their medical condition,” they wrote.

The hospital groups cite an analysis by Dobson | Davanzo,  a healthcare consulting firm, found physician-owned hospitals were less likely to have non-white patients, Medicaid discharges, and they had a lower percentage of Medicare claims with emergency room services compared to other hospitals. The analysis compared 163 physician-owned hospitals with 3,020 other hospitals.

Under the Affordable Care Act signed by former President Barack Obama, most physician-owned hospitals have been barred from expanding capacity, and new facilities have been barred from participating in the Medicare program.

The Centers for Medicare & Medicaid Services is now looking to tighten some restrictions on physician-owned hospitals.

In its proposed Inpatient Prospective Payment System rule for 2024, CMS says it wants to again restrict expansion of physician-owned hospitals designated as “high Medicaid facilities” and to set maximum limits on the expansions of those hospitals. CMS says it wants to restore some provisions that were removed during former President Trump’s administration.

Still, Republican lawmakers are sponsoring legislation that would lift some restrictions on physician-owned hospitals.

A host of Republican senators, led by U.S. Sen. James Lankford of Oklahoma, have sponsored a bill that would allow for the creation of new physician-owned hospitals and allow those providers to participate in Medicare and Medicaid.

"It is clear we need more options and innovation in health care, not less," Lankford said in a statement. "The Affordable Care Act unfairly prohibits the creation and expansion of physician-owned hospitals, reducing yet another health care access point for Oklahomans and people around the country, particularly those on Medicare and Medicaid."

Jack Resneck Jr., president of the American Medical Association, has issued a statement of support for the Senate bill.

“Physician-led hospitals meet community needs by focusing on the most important relationship in health care—the patient-physician relationship,” Resneck said in a statement. “Yet, the combination of current law and hospital consolidation is making these success stories rare.”

Two House members, Republican U.S. Rep. Michael C. Burgess of Texas and Democratic U.S. Rep. Henry Cuellar of Texas, have introduced a bill in that chamber.

“Physicians understand more than anyone the importance of quality, efficient, and cost-effective patient care. That is why physician-owned hospitals play a vital role in the American health care system,” Burgess said in a statement.

Critics of physician-owned hospitals contend there are unavoidable conflicts of interest when doctors refer patients to facilities they own, or if they have an ownership stake in those facilities.