This discussion was recorded on November 16, 2023. This transcript has been edited for clarity.
Robert D. Glatter, MD: Welcome. I’m Dr. Robert Glatter, medical advisor for Medscape Emergency Medicine. Joining me today is Dr. Brian J. Miller, a hospitalist with Johns Hopkins University School of Medicine and a health policy expert, to discuss the current and renewed interest in physician-owned hospitals.
Welcome, Dr. Miller. It’s a pleasure to have you join me today.
Brian J. Miller, MD, MBA, MPH: Thank you for having me.
History and Controversies Surrounding Physician-Owned Hospitals
Dr. Glatter: I want to start off by having you describe the history associated with the moratorium on new physician-owned hospitals in 2010 that’s related ultimately to the Affordable Care Act, but also, the current and renewed media interest in physician-owned hospitals that’s linked to recent congressional hearings last month.
Dr. Miller: Thank you. I should note that my views are my own and don’t represent those of Hopkins or the American Enterprise Institute, where I’m a nonresident fellow nor the Medicare Payment Advisory Commission, of which I’m a Commissioner.
The story about physician-owned hospitals is an interesting one. Hospitals turned into health systems in the 1980s and 1990s, and physicians started to shift purely from an independent model into a more organized group practice or employed model. Physicians realized that they wanted an alternative operating arrangement. You want a choice of how you practice and what your employment is. And as community hospitals started to buy physicians and also establish their own physician groups de novo, physicians opened physician-owned hospitals.
Physician-owned hospitals fell into a couple of buckets. One is what we call community hospitals, or what the antitrust lawyers would call general acute care hospitals: those offering emergency room (ER) services, labor and delivery, primary care, general surgery — the whole regular gamut, except that some of the owners were physicians.
The other half of the marketplace ended up being specialty hospitals: those built around a specific medical specialty and series of procedures and chronic care. For example, cardiac hospitals often do CABG, TAVR, maybe abdominal aortic aneurysm (triple A) repairs, and they have cardiology clinics, cath labs, a cardiac intensive care unit (ICU), ER, etc. There were also orthopedic surgical specialty hospitals, which were sort of like an ambulatory surgery center (ASC) plus several beds. Then there were general surgical specialty hospitals. At one point, there were some women’s health–focused specialty hospitals.
The hospital industry, of course, as you can understand, didn’t exactly like this. They had a series of concerns about what we would historically call cherry-picking or lemon-dropping of patients. They were worried that physician-owned facilities didn’t want to serve public payer patients, and there was a whole series of reports and investigations.
Around the time the Affordable Care Act passed, the hospital industry had many concerns about physician-owned specialty hospitals, and there was a moratorium as part of the 2003 Medicare Modernization Act. As part of the bargaining over the hospital industry support for the Affordable Care Act, they traded their support for, among other things, their number one priority, which is a statutory prohibition on new or expanded physician-owned hospitals from participating in Medicare. That included both physician-owned community hospitals and physician-owned specialty hospitals.
Dr. Glatter: That was part of the impetus to prevent physicians from referring patients where they had an ownership stake. Certainly, hospitals can be owned by attorneys and nonprofit organizations, and certainly, ASCs can be owned by physicians. There is an ongoing issue in terms of physicians not being able to have an ownership stake. In terms of equity ownership, we know that certain other models allow this, but basically, it sounds like this is an issue with Medicare. That seems to be the crux of it, correct?
Dr. Miller: Yes. I would also add that it’s interesting when we look at other professions. When we look at lawyers, nonlawyers are actually not allowed to own an equity stake in a law practice. In many other professions, you either have corporate ownership or professional ownership, or the alternative is you have only professional ownership. I would say the hospital industry is one of the few areas where professional ownership not only is not allowed, but also is statutorily prohibited functionally through the Medicare program.