Lifting restrictions on physician-owned hospitals could be key to widening access to care

As the CMS considers lifting Affordable Care Act restrictions on how physician-owned hospitals can expand their facilities, clinicians claim that move could be a key factor in improving access to care.

Under the ACA, physician-owned hospitals cannot expand their existing facilities without HHS secretary approval. The restrictions stemmed from providers' concerns that physicians would refer the healthiest patients to the hospitals they own, sparking a bias in quality scores and forcing other hospitals to treat costlier, sicker patients.

But some recent studies show that preferential treatment isn't as widespread as health systems think.

James Hinton, CEO of Baylor Scott & White Health, a Dallas-based health system and other executives have urged the CMS to repeal the restrictions on existing physician-owned hospitals, responding to an April request for hospitals to weigh in on the appropriate role for physician-owned hospitals within the delivery system and how current restrictions affect patients and healthcare access.

"Due to limited bed space and operating and procedure rooms, patients are turned away and referred to other hospitals," Hinton said in a June comment letter to the CMS.

The request for information and the related proposed rule came just weeks after a study found that patients wait an average of 24 days to schedule an appointment with a doctor, a 30% jump from 2014. Those delays could get even longer as baby boomers become eligible for Medicare.

The restrictions on physician-owned hospitals have effectively eliminated the formation of new hospitals and additional choices for patients to receive quality care. For example, the restrictions resulted in construction freezes for 45 partially completed physician-owned hospitals, according to Dr. James Madara, CEO of the American Medical Association.

Removing the restrictions also could lead to Medicare savings, proponents say, since physician-owned hospitals could serve as competition as hospitals continue to merge and consolidate, which generally results in higher prices.

When hospitals merge in already concentrated markets, the price increases can be dramatic, often exceeding 20%, according to Madara.

"The appropriate role of physician-owned hospitals . . . is to act as a true competitor with other hospitals," Madara said in a June comment letter.

The CMS also received comments from major health systems urging the agency to keep the restrictions in place. Those executives claimed that letting physician-owned hospitals expand without the checks could lead to abuse of Medicare funds.

"It is generally accepted that financial self-interest leads to increased utilization for certain services," Tonya Wells, vice president of public policy and federal advocacy for Trinity Health, a health system made up of 93 hospitals, said in a June comment letter.

Wells noted that numerous studies found that doctor ownership of hospitals coincided with a significant change in the owners' practice patterns.

She also pointed out that the Congressional Budget Office estimated that the 2010 provision banning new physician-owned hospitals would reduce the deficit by $500 million over 10 years.

If the Trump administration lifts the restrictions, it should increase inpatient rates to offset the increase in high-risk patients that nonphysician-owned hospitals likely will see, Wells said.

Other hospital executives are also dubious of claims physician-owned facilities will save Medicare money by increasing competition, according to Michael Griffin, vice president of advocacy and public policy for the Florida division of Adventist Health System.

He cited a 2014 letter from the U.S Chamber of Commerce, which has opposed the ACA but supports the prohibition on physician-owned hospitals. The lobbying organization argued that doctor-owned hospitals increase utilization and costs to businesses and taxpayers, and distort healthcare markets.

"The ACA moratorium on (physician-owned hospitals) put an end to the rapid growth of these hospitals and helped create stability in the healthcare market," Griffin said in a June comment letter.