Health Law Bans New Doctor-Owned Hospitals, Blocks Expansion of Existing Ones
Monday, April 12, 2010
Fred Lucas, Staff Writer
– The new health care overhaul law, which promised increased access and
efficiency in health care, will prevent doctor-owned hospitals from
adding more rooms and more beds, says a group that advocates physician
involvement in every aspect of health care delivery.
Physician-owned hospitals are advertised as less bureaucratic and more
focused on doctor-patient decision making. However, larger corporate
hospitals say doctor-owned facilities discriminate in favor of
high-income patients and refer business to themselves.
The new health care rules single out such hospitals, making new
physician-owned projects ineligible to receive payments for Medicare
and Medicaid patients.
Existing doctor-owned hospitals will be grandfathered in to get
government funds for patients but must seek permission from the
Department of Health and Human Services to expand.
To get the department’s permission, a doctor-owned hospital must be in
a county where population growth is 150 percent of the population
growth of the state in the last five years; inpatient admissions must
be equal to all hospitals located in the county; the bed-occupancy rate
must not be greater than the state average, and the hospital must be
located in a state where hospital bed capacity is less than the
The rules fall under Title VI, Section 6001 of the Patient Protection
and Affordable Care Act. The provision is titled “Physician Ownership
and Other Transparency – Limitations on Medicare Exceptions to the
Prohibition on Certain Physician Referral for Hospitals.”
More than 60 doctor-owned hospitals across the country that were in the
development stage will be canceled, said Molly Sandvig, executive
director of Physician Hospitals of America (PHA).
“That’s a lot of access to communities that will be denied,” Sandvig
told CNSNews.com. “The existing hospitals are greatly affected. They
can’t grow. They can’t add beds. They can’t add rooms. Basically, it
stifles their ability to change and meet market needs. This is really
an unfortunate thing as well, because we are talking about some of the
best hospitals in the country.”
The organization says physician-owned hospitals have higher patient
satisfaction, greater control over medical decisions for patients and
doctor, better quality care and lower costs. Further, physician-owned
hospitals have an average 4-1 patient-to-nurse ratio, compared to the
national average of 8-1 for general hospitals.
Further, these 260 doctor-owned hospitals in 38 states provide 55,000
jobs, $2.4 billion in payroll and pay $509 million in federal taxes,
according to the PHA.
In one ironic aspect, President Barack Obama’s two largest legislative
achievements clashed. The Hammond Community Hospital in North Hammond,
Ind., got $7 million in bond money from the federal stimulus act in
2009. It will likely be scrapped because of the new rules on
physician-owned hospitals, according to the Post-Tribune newspaper in
Doctor-owned hospitals have long been a target of the American Hospital
Association, which represents corporate-owned hospitals as well as
An AHA study from 2008 says that physician-owned hospitals “lessen
patient access to emergency and trauma care;” “damage the financial
health of full-service hospitals and lead to cutbacks in service;” “are
not more efficient than full service community hospitals;” “use
physician-owners to steer patients;” “cherry pick the most profitable
patients;” and “provide limited or no emergency services.”
One AHA fact sheet asserts that physician-owned orthopedic and surgical
hospitals costs are 20-30 percent higher than average hospitals.
Further, these hospitals lead to higher profits just for doctors, the
“We don’t cherry pick patients, period, end of story. We take patients
based on their need for care, not on their ability to pay,” Sandvig
said. “It [the health care reform] puts control outside the hand of
physicians and patients and into bureaucrats’ hands really.
The Association of American Physicians and Surgeons (AAPS) is one of
many organizations suing to have the law declared unconstitutional on
the grounds that the federal government cannot compel someone to buy a
While the provision on physician hospitals is not part of the lawsuit,
it will affect it, said Dr. Jane Orient, AAPS executive director.
“If the law is declared unconstitutional, then the prohibition is part
of the bill,” Orient told CNSNews.com. “There are vested interests in
getting rid of physician-owned hospitals because they do a better job
and are more affordable.”
The provision in the legislation and efforts opposing these hospitals can be simply explained from Sandvig’s view.
“It’s anti-competitive. I think it’s pretty clear,” Sandvig said.
“We’re a model that makes sense that’s affecting innovation. We’re
trying to do something better than it has been done. Anytime you do
that, there’s going to be a clash between the existing and the new.
Unfortunately, it’s a real David and Goliath battle.”
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