New research may sway physician-owned hospital debate

Physician-owned hospital prices were about a third lower than at traditional hospitals in the same market, a study found, potentially fueling debate over legislation that would remove the ban on building more physician-owned hospitals.

Estimated prices negotiated between hospitals and commercial insurers for eight common procedures were 33.7% lower at physician-owned hospitals compared with traditional hospitals in their markets, according to a peer-reviewed analysis of more than 150 physician-owned and 1,100 non-physician-owned hospitals. The analysis was conducted by researchers at Johns Hopkins University, Texas Christian University and University of Texas Medical Branch.

The research, published Friday in the Journal of the American Medical Association Network Open, used January 2023 data from the price transparency law to compare prices for what the Centers for Medicare and Medicaid Services deems as shoppable procedures, ranging from an emergency department visit to a spinal scan.

Physician-owned hospitals’ negotiated prices were lower than their in-market peers for seven of the eight procedures studied, the outlier being comprehensive metabolic panels. The price differences ranged from 4% for blood tests to 33% for lower spinal canal MRIs, researchers found.

Sen. James Lankford (R-Okla.), along with a dozen other Republican senators, introduced a bill in February that would allow new physician-owned hospitals and permit them to participate in Medicare and Medicaid. Rep. Michael Burgess (R-Texas) led the legislation’s introduction in the House. They sit in the Senate Finance Committee and House Ways and Means Committee, respectively.

The legislation would unwind an Affordable Care Act provision limiting physician-owned hospitals. Under the ACA, hospitals that are partially or wholly owned by physicians are barred from expanding and new facilities can’t participate in the Medicare and Medicaid programs. The American Hospital Association opposes the bill, arguing that physicians have an inherent conflict of interest referring patients to a hospital in which they have a financial stake.

The American Medical Association counters that the legislation would level an uneven playing field that has favored non-physician-owned hospitals and led to consolidation, arguing that physician-owned hospitals produce better outcomes at lower costs.

“This study is going to provide powerful ammunition to those who want to repeal this ACA provision,” said Robert Moffit, a senior research fellow in the Center for Health and Welfare Policy at the Heritage Foundation, a right-leaning think tank, and former chairman of the Maryland Health Care Commission. He was not involved with the study.

Several studies have compared the outcomes of physician-owned hospitals and their counterparts, but this is the first analysis of pricing differences, said Ge Bai, co-author of the study and an accounting and health policy professor at Johns Hopkins.

“Congress should let all hospitals compete,” she said. 

While it is a small study with several limitations, it offers a “glimmer of hope” that transparency may be increasing pricing competition, said Glenn Melnick, a health economist and public policy professor at the University of Southern California and a researcher at its Schaeffer Center for Health Policy and Economics. The services under review were not weighted by volume, he cautioned.

Some sample-selection bias may have occurred, given the limited number of procedures studied, according to the study. Also, physician-owned hospitals serve fewer Medicaid patients and provided less charity care, which may allow them to accept lower commercial prices, the study said.

A 2015 peer-reviewed study of 219 physician-owned hospitals and nearly 2,000 traditional hospitals found that physician-owned hospitals treat slightly healthier patients but do not systematically avoid Medicaid patients and people of color. The analysis was conducted by researchers from Massachusetts General Hospital, Harvard University and University of California, San Francisco.