Hospital groups aim to blunt effort to reverse ACA ban on physician-owned hospitals

 Hospital lobbying groups are mobilizing to blunt any efforts on Capitol Hill to reverse a ban on physician-owned hospitals, including releasing a new analysis that claims such facilities cherry-pick patients. 

The analysis (PDF), released Tuesday by the American Hospital Association (AHA) and the Federation of American Hospitals (FAH), is part of a general effort by the groups to keep in place a ban on physician-owned hospitals passed alongside the Affordable Care Act (ACA) back in 2010. But critics say the hospital industry wants to stifle competition as the industry becomes more consolidated.

“The growth of physician-owned hospitals was restricted by Congress for good reasons and those remain valid today as this analysis shows,” said Rick Pollack, president and CEO of the AHA, in a statement.

The ACA prohibited any physician from building or owning a hospital and limited the growth of any facility that was already in operation. The goal of the ban was to combat facilities that supposedly admitted primarily healthier patients and only admitted patients on private insurance.

The analysis, conducted by consulting firm Dobson DaVanzo, on behalf of the groups compared 163 physician-owned hospitals to 3,020 non-physician hospitals. The group looked at data from Medicare cost reports from 2020 to 2021 and Medicare claims for information on inpatient and outpatient services offered by such facilities. 

Overall, the consulting firm found that physician-owned hospitals “generally treat a population that is younger, less complex or comorbid and less likely to be dually eligible or non-white” compared to traditional facilities. 

Physician-owned facilities also “have higher margins and lower unreimbursed and uncompensated care costs as a percent of net patient revenue compared to non-[physician-owned hospitals],” according to a fact sheet on the analysis. 

The firm found that 5.6% of physician facilities had a Medicare maximum readmission penalty of 3% compared with only 1% of non-physician-owned hospitals. It also found 6.7% of traditional facilities had uncompensated care costs as a percent of net patient revenue compared with 3.1%. 

The hospital groups charge that these findings reinforce concerns from more than a decade ago over whether physician facilities select only healthy patients and increase the use of unnecessary tests or treatments. 

“If there was every any doubt, the evidence against [physician-owned hospitals] is as crystal clear today as it was when Congress passed the self-referral ban in 2010,” said FAH President and CEO Chip Kahn in a statement.

Proponents of reversing the ACA ban slammed the analysis, which was not peer reviewed.

"An industry-funded consulting report that cherry-picks data is no comparison for a peer-reviewed study in the British Medical Journal from Harvard researchers that demonstrated that physician-owned hospitals had the same share of Medicaid patients as tax-exempt hospitals,” said Brian Miller, nonresident fellow with the think tank American Enterprise Institute, in a statement to Fierce Healthcare. 

He referred to a 2015 BMJ study that looked at 219 physician hospitals and 1,967 regular facilities. The study found that while physician-owned hospitals could treat slightly healthier patients, they don’t appear to “systematically select more profitable or less disadvantaged patients or to provide lower-value care.”

A 2021 study that Miller co-authored also found that physician-owned facilities offered higher quality services compared to competing facilities, and specialty facilities had lower in-hospital and/or 30-day mortality rates. 

Proponents also say that enabling physicians to own facilities again can help stem a growing trend of rural facilities that have closed up in recent years. 

"Allowing doctors to own and run hospitals would give rural communities another option to maintain local high-quality care and encourage local investment in existing hospitals," according to a Wall Street Journal op-ed authored by Miller and Sen. James Lankford, R-Oklahoma, who co-sponsored legislation to reverse the ban.

The debate comes amid scrutiny of increasing consolidation in the hospital industry and whether such mergers lead to lower quality and higher prices. The Federal Trade Commission, for instance, has filed lawsuits to halt mergers across several states over concerns they would boost prices. 

There is bipartisan interest in striking down the ban, with bills in the House and Senate to do so. It remains unclear, though, whether such a ban would make it through the divided Congress. 

“Doctors understand what it takes to make a hospital run,” said Rep. Michael Burgess, R-Texas, during a hearing Tuesday on hospital price transparency in the House Energy and Commerce Committee’s health subcommittee. “They want the best facility for their patients. They want a facility that meets their needs.”

https://www.fiercehealthcare.com/providers/hospital-groups-aim-blunt-effort-reverse-aca-ban-physician-owned-hospitals