Study finds ACA blocked formation of physician-owned hospitals

The Affordable Care Act effectively stopped new physician-owned hospitals from forming, according to a study published in the August issue of Health Affairs.

Though some argue physician-owned hospitals create the perfect environment to accomplish the goals of the Triple Aim, skeptics argue that their architecture improperly incentivizes physicians to refer patients to their own facilities and cherry pick the healthiest patients.

For these reasons, the ACA included several restrictions on POHs. These included a restriction on Medicare or Medicaid patient referrals by physicians to any hospitals they have ownership share in, a restriction on increasing aggregate physician ownership of a POH and a restriction on increasing the number of POH operating rooms and beds.

To determine if the ACA was able to effectively curtail the formation and expansion of these hospitals, the researchers examined the behavior of 106 POHs based in Texas. The researchers noted POHs could get around the ACA restrictions if they stopped accepting Medicare or Medicaid and found new ways to increase profits through existing resources. To adjust for these potential moves, the researchers examined if the percentage of POHs that accept Medicare changed before and after the implementation of the ACA and if POHs restructured their assets to improve profitability.

However, the researchers found POHs need Medicare to remain viable. There was no evidence the hospitals studied stopped accepting Medicare to avoid the restrictions under the ACA, according to the report. New POHs with investor groups that did stop taking Medicare have been sold or declared bankruptcy, the authors noted.

"Given Medicare's importance to physician-owned hospitals' viability, the restrictions on the hospitals appear to have accomplished what their proponents intended: eliminating the formation of new physician-owned hospitals and severely curtailing expansion of existing ones," the authors wrote.

They did note, however, that POHs have been working in a post-ACA world to improve profits with existing assets, such as ordering more tests. "[T]hese results may also suggest a new trend in operations of physician-owned hospitals: excessive asset and employee churn, with potential negative impacts on healthcare quality," the authors wrote.


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