Healthcare News & Insights

New study finds physician-owned hospitals aren’t outliers

patient-with-iv-in-handPhysician-owned hospitals (POHs) have gotten a bad rap for years. They’ve been accused of cherry-picking the healthiest patients and leaving the sickest ones for non-POHs. But a new study finds that bad rap may be unwarranted. 

The study, published online by the British medical journal, The BMJ, found POHs aren’t outliers in term of the patients they service, the quality of care they provide or their costs to the healthcare system. It also questions whether policies that broadly regulate all POHs are even necessary.

Why such a bad rap?

It appears a lot of the evidence that charges POHs with cherry-picking healthier patients, providing lower quality care, and avoiding poorer and potentially more expensive patients, is based on studies of specialty hospitals – some, but not all of which, are POHs – and data that’s a decade old.

Few studies have directly examined the impact of physician ownership and its effects, as opposed to specialty status.

This study, however, set out to determine the characteristics of contemporary POHs and how they compare with other U.S. hospitals. It also looked at if POHs avoid certain patients and whether the care they provide is of lower quality or more costly to the Centers for Medicare & Medicaid (CMS).

Study details

The observational study looked at 2,186 U.S. acute care hospitals of which 219 were POHs. The hospitals were located in 95 referral regions in 2010.

The conclusion was while POHs may treat slightly healthier patients, they don’t seem to systematically select more profitable or less disadvantaged patients or provide lower value care.

The reason they might treat “slightly healthier” patients is because many of these facilities “are smaller and have fewer of the advanced capabilities and subspecialty expertise necessary to care for complex and critically ill patients,” wrote the study authors.

The hospitals in the study were selected from lists of medical and surgical POHs from the Physician Hospitals of America and linked data from the 2010 American Hospital Association (AHA) survey, 2010 Medicare claims data concerning inpatient hospital admissions and Medicare Hospital Compare.

Each POH was assigned to one of 306 hospital referral regions and were compared with other non-POHs within the hospital referral region. Hospitals that specialized in obstetrics and gynecology, rehabilitation and long-term acute care were excluded.

Researchers accounted for geographic variations in access to healthcare services, case mix, and patterns of service utilization and healthcare spending.

Patients were evaluated by mean age, discharge diagnosis, source of admission, discharge destination, Elixhauser comorbidities, race and insurance status of patients receiving care in POHs compared with non-POHs.


The study found:

  • POHs were more likely to have less than 100 beds, be located in urban areas and be specialized
  • All 219 POHs were for profit
  • POHs and non-POHs accounted for 6.3% and 93.7% of Medicare admissions, respectively, in hospital referral regions where they were present, and
  • No major teaching hospitals were POHs.

As far as patients go:

  • The differences in mean age and sex of patients between the two were modest
  • Patients admitted to POHs were younger than those admitted to non-POHs
  • POHs had slightly more admissions through physician or clinical referral and somewhat fewer admissions through their emergency departments
  • POH patients were less likely to be discharged to hospice care and more likely to be discharged home
  • They both admitted similar proportions of Medicare, Medicaid, black and Hispanic patients
  • Mean POH hospital stays were shorter than at non-POHs, and
  • Patients admitted to both had comparable numbers of comorbidities and similar predicted mortality scores.

When it came to quality of care, differences weren’t statistically significant. And as for cost of care POHs and non-POHS had similar costs and payments for episodes of care for acute myocardial infarction, congestive heart failure and pneumonia.

Debate rages on

With all of these results, is the 2010 federal healthcare law that banned new doctor-owned hospital and limited the growth of existing ones really necessary?

The AHA believes it is, and opposes legislation that was introduced in May to Congress that would lift the restriction.

In a Kaiser Health News report, Thomas Nickels, an executive at the AHA, called the BMJ study “incomplete and somewhat flawed.” Reason: he criticized the researchers for not examining whether these physicians were more likely to refer patients to their own facilities – one of the main reasons the AHA is encouraging Congress to keep the restrictions in place.

“They refer patients to their hospital that they want and they don’t take others,” Nickels said. “These institutions are enormously profitable, and they’re profitable because they’re choosing what kind of patients to take.”

On the other hand, Dr. R. Blake Curd, president of Physician Hospitals of America, is happy with the study, saying in the KHN report, “This is a great look at the physician-owned hospital industry as a whole. You can’t paint us with one broad brush stroke, which is what the American Hospital Association is always trying to do.”

After all, 120 of the POH facilities were general acute care hospitals, that had sicker patients, and more low-income and minority patients than did the 99 specialty POH facilities.

Dr. Ashish Jha, the study’s senior author and a professor at the Harvard School of Public Health, said in the KHN article, “There are much bigger differences between public hospitals and nonprofit hospitals, but we don’t go around banning all nonprofit hospitals.”

So will Congress lift the restrictions?

Nickels says no since no companion bill has been introduced in the Senate. But Dr. Curd said lawmakers were receptive and he expects a Senate bill will be introduced.

We’ll keep you posted when we find out who’s right.

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