10 things to know about physician-owned hospitals

Physician-owned hospitals have long been a controversial facet of U.S. healthcare. Proponents say POHs align with the Affordable Care Act's goal of the triple aim — improving care, improving population health and reducing costs. Meanwhile, critics purport that physicians' ownership of hospitals incentivizes them to improperly refer patients to facilities in which they have a financial interest or order unnecessary medical procedures, according to Health Affairs.

Critics also argue that POHs might cherry pick healthier patients and those seeking specialized and highly profitably medical treatment, which would negatively affect competing hospitals' bottom lines and lower their own ability to provide indigent care, according to the report.

The concerns prompted legislators to impose several restrictions on POHs under the ACA, such as 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 gauge the effect the ACA has had on POHs so far, researchers at Health Affairs examined the behavior of 106 such facilities in Texas.

Here are 10 key takeaways from their findings and further insight on the workings of POHs, according to Health Affairs.

1. Results of the study showed the introduction of the ACA and its provisions related to POHs accelerated formation of new POHs before the law was implemented. For existing ones, researchers found increases in both aggregate physician ownership and physical capacity. They did not identify any evidence that these hospitals have stopped accepting Medicare since the law was enacted.

2. A handful of POHs formed after the implementation of the ACA. All of the nine such hospitals formed in Texas between 2011 and 2013 — none of which accepted Medicare — and have been sold or are part of bankruptcy filings.

3. Since the ACA's restrictions came into effect, POHs have taken greater efforts to leverage their physical assets and human capital, leading to increased profitability.

4. According to the study, POHs are typically much smaller than other hospitals. For example, in 2012, POHs had an average of 276 full-time equivalent employees and 2,527 annual admissions, while other hospitals had an average of 420 FTEs and 4,756 admissions.

5. POHs are more likely to have emergency departments and operating rooms, but have fewer ED visits on average. However, POHs perform more surgeries per OR and perform a substantially larger percentage of surgeries in an outpatient setting, compared to non-POHs.

6. Forty-two percent of POH revenue comes from outpatient surgeries, compared with 28 percent of non-POH revenue.

7. Just over 63 percent of POHs are engaged in general medical and surgical care, compared with 51.5 percent of non-POHs. About 17.9 percent of POHs provide acute long-term care compared to 27 percent of non-POHs, according to the study.

8. POHs generate higher mean revenue per adjusted patient day than non-POHs ($2,710 versus $1,201, respectively).

9. POHs also have higher mean total expenses per adjusted patient day than non-POHs ($2,307 versus $1,424, respectively).

10. While Medicare admissions far exceed Medicaid admissions at POHs and non-POHs, rates of both types of admissions were lower in POHs than non-POHs, according to the report. Because Medicare and Medicaid patients are often sicker and more expensive to treat, community hospitals likely feel the negative spillover effect.

More articles on hospital and physician issues:
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