A bipartisan group of lawmakers wants to lift Obamacare-era restrictions on physician-owned hospitals, citing a lack of rural healthcare options and less market competition amid rising hospital mergers.
Two Republicans and two Democrats are co-sponsoring the House’s Physician Led and Rural Access to Quality Care Act.
If enacted, the bill would allow some exemptions to a ban on hospitals owned by doctors to be opened in rural areas and remove a ban on the expansion of such existing hospitals. Specifically, the bill defines “covered rural hospital” as more than a 35-mile drive — or 15-mile drive in treacherous travel areas — from another hospital or critical access hospital.
The lead sponsors are Reps. Michael Burgess, R-Texas, the co-chairman of the House GOP Doctors Caucus; Tony Cárdenas, D-Calif.; Morgan Griffith, R-Va.; and Vicente Gonzalez, D-Texas.
“Texans in rural areas face constant challenges due to limited access to patient care and hospitals, putting their wellbeing at greater risk daily,” Burgess said in a public statement. He added, “Having owned my own practice, I understand the critical importance of affordable healthcare prices and timely access to high-quality care. I am honored to lead this bipartisan legislation with my fellow members to ensure that rural patients across America receive the care they need.”
The 2010 Affordable Care Act, among other things, banned future physician-owned hospitals and the expansion of existing ones. According to advocacy groups such as the American Hospital Association, the reason was to address potential conflicts of interest if doctors self-refer patients to a facility where they have a financial stake.
Expanding doctor-owned hospitals would likely help patient access and hospitals’ bottom lines alike, said James Calver, a partner at TechCXO. Calver has been an interim CEO in the healthcare industry and is also currently the operating expert for Metropolitan Partners Group.
“As someone who’s overseen over 70 consolidations in the healthcare space, I’ve seen how hospital consolidation in a geographic market can lead to higher prices, lower quality care, and fewer choices for patients,” Calver told Inside Sources.
“What critics of this type of expansion often get wrong is the assumption that physician ownership necessarily creates conflicts of interest or leads to unnecessary care,” Calver added. “In reality, large integrated healthcare systems and non-physician owned hospitals can also engage in practices that prioritize profits over patient care. The key is to allow fair competition, particularly in underserved rural markets, and let market forces determine which models provide the best care at the lowest cost.”
Still, critics say the restriction has harmed competition and restricted health access.
“The Affordable Care Act’s ban on creating and expanding physician-owned hospitals was misguided from the start,” Sally C. Pipes, the president of the Pacific Research Institute, said in a statement to InsideSources.“Essentially, it protects big hospital chains from small, new competitors.”
Pipes noted this more than just a problem for rural areas. “Most metro areas have highly consolidated hospital markets. Repealing restrictions on physician-owned hospitals would inject much-needed competition into the industry.”
Opposing sides point to different data to bolster their side.
The American Hospital Association points to a Congressional Budget Office finding that the ban saved $500 million over 10 years. The AHA also contends that doctor-owned hospitals “cherry-pick the most profitable patients” and cites the Government Accountability Office and the Centers for Medicare & Medicaid Services to assert their patients tend to be healthier.
“The AHA strongly opposes expansion of (physician-owned hospitals) by either creating new categories of exceptions or allowing existing (those hospitals) to expand,” Lisa Kidder Hrobsky, AHA’s senior vice president of federal relations, advocacy and political affairs, said in a statement to InsideSources.
“Allowing more (physician-owned hospitals) in rural areas would be particularly destabilizing because these areas have a limited patient population, with the full-service hospitals there struggling to cover operating costs,” she added. The hospitals “will only increase costs, reduce quality, and increase health disparities in these areas.”
However, a 2023 study in the Journal of the American Medical Association found that a sampling of 156 physician-owned hospitals opened before the ban had prices about a third lower than hospitals in the same region. The review compared it to 1,116 non-physician-owned hospitals, the health news site Fierce Health Care reported.Last year, the Physicians Advocacy Institute and the Physicians Foundation commissioned a study by academics that determined Medicare payments would be 8.6 percent to 15.2 percent less expensive for beneficiaries if reimbursed at a physician-owned hospital.
“As we assess the need for more affordable and quality healthcare for hard-working Americans, we must consider every viable option to meet the demand,” Cardenas, one of the House co-sponsors, said in a statement about the bill. “The Physician Led and Rural Access to Quality Care Act is a common-sense bipartisan effort that will provide more care options and give the physicians who care for us the ability to open hospitals in communities facing great need.”
