Who pays the price when physician-owned hospitals offer lower cost care?

July 04, 2023
by Gus Iversen, Editor in Chief
Physician-owned hospitals have long been suspected of hampering access to affordable healthcare, but a new study highlights their cost-saving capabilities. Researchers from the U.S. and Canada have published findings in JAMA Network Open indicating that, at least for eight services, physician-owned facilities are charging roughly one-third (33%) less than their non-physician-owned hospital counterparts.

Using data from the Hospital Price Transparency Rule, the authors compared prices at 156 general acute-care physician-owned hospitals located in 78 hospital referral regions across the U.S. with 1,116 non-physician-owned hospitals within the same regions. The eight services analyzed for cost comparison included MR scans of lower spinal canal (33% less) and CT scans of abdomen and pelvis (20% less).

The study, which was funded by Patient Rights Advocate, a group advocating for healthcare price transparency, offered other insightful metrics: Physician-owned hospitals had 55 beds compared to 162 at non-physician-owned, and higher profit margins (15.2% versus 7.1%). Unlike their counterparts, the vast majority of physician-owned hospitals were for-profit, non-teaching, and non-critical access.

A bigger, more complicated picture
Although the researchers were surprised by their findings, they did offer an explanation for the cost disparity.

Yang Wang, lead researcher and assistant scientist in the department of health policy and management at Johns Hopkins School of Public Health, pointed out that non-POHs treated twice as many Medicaid patients and provided nearly three times as much charity care as POHs.

“That might be one reason that might enable them to accept lower commercial prices,” Wang told HCB News.

The American Hospital Association put a finer point on the difference between physician-owned and non-physician-owned hospital patient demographics, saying in its own response to the study that the data “shows conclusively that POHs shun medically complex patients, as well as the uninsured and those on Medicaid.”

The AHA response, by Stacey Hughes and Chip Kahn, goes on to question the use of price transparency data over claims data, saying it does not reflect actual provider payments. In the case of emergency care (which was among the eight services analyzed), they argue that prices listed by physician-owned hospitals may be “ghost rates” that are never actually put into use because those facilities typically “provide far fewer emergency services — if any at all” compared to general hospitals.

Renewed legislative interest
The Affordable Care Act prohibited physicians from opening new hospitals starting in 2010, but the new study comes at a time when Congress is reassessing that moratorium with H.R. 977, the Patient Access to Higher Quality Health Care Act of 2023.

Opponents of the bill, (including the AHA) argue it would allow physicians to self-refer the healthiest patients with the most profitable insurance arrangements to reap large profits for themselves, exacerbating care disparities by driving revenue away from other providers who will be left to deal with less profitable or unprofitable cases. Such an arrangement could put further strain on existing hospitals, leading to greater hardship for patients seeking treatment they cannot receive at non-physician-owned facilities.

Advocates for the bill, such as Physician-Led Healthcare for America, view its merits in terms of competition and an open market.

“Medicare allows the physician ownership of ambulatory surgery centers, imaging, physical therapy and in many other circumstances,” said Frederic Liss, president of the lobbying group, in an April statement. “Physician ownership is allowed because it leads to efficiency, high quality of care for patients and much needed competition that drives down cost. Our nation’s healthcare system has reached the point in which Americans are facing untenable costs, and it’s clear that it is time to remove the arbitrary ban on physician-led hospitals to spur competition.”

Additional reporting by John R. Fischer.