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PHA Urges Members of Congress to Support H.R. 1156

Wednesday, March 1, 2017   (0 Comments)
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The following letter may be downloaded as a PDF here.


March 1, 2017


Dear Member of Congress:


On behalf of Physician Hospitals of America (PHA) and physician-owned hospitals across the United States, we write to strongly urge you to support H.R. 1156, the “Patient Access to Higher Quality Health Care Act of 2017.” Physician-owned hospitals treat similar patient populations as their non-physician-owned counterparts while delivering higher-quality and lower-cost care.  Don’t take PHA’s word for it: these facts are proven using government data and independent third party peer reviewed research, not bought-and-paid-for white papers.


The propaganda put out against physician-owned hospitals by the American Hospital Association (AHA) and the Federation of American Hospitals (FAH) is false and must be rejected outright. For nearly 20 years, these two associations – representing the nation’s large tax-exempt and investor-owned hospitals – have taken every opportunity to disparage physician-owned hospitals using untruthful methods, citing outdated or flawed studies to disseminate false claims about hospitals with physician ownership. Ironically, over a third of hospitals with physician ownership also include ownership by the members of these very organizations.


Physician-Owned Hospitals DO NOT Cherry Pick Patients

The first and most prominent false claim relied upon by the AHA and FAH to perpetuate the anti-competitive ban on physician ownership is that physician-owned hospitals “cherry pick” healthier and more profitable patients due to financial conflicts of interest. This is breathtaking as their member hospitals have the same perceived conflicts, with well over 50% of physician practices now owned by large hospital systems, who require their physicians to refer to their own hospitals and ancillary facilities. Talk about a conflict of interest.


Quoting a bought-and-paid-for white paper by Dobson | DaVanzo they contend that physician-owned hospitals “avoid Medicaid and uninsured patients,” and “treat fewer medically complex patients.” This tried and false accusation does not hold up under scrutiny.


An independent, peer-reviewed 2015 The BMJ study of 219 physician-owned hospitals – the most comprehensive examination ever conducted – directly contradicts what the AHA and FAH present to Congress. The BMJ study authors found “no clinically or statistically significant differences in patient mix between POHs and non-POHs” and that “POHs have virtually the same proportions of Medicaid patients and racial minorities, as well as similar quality of care.”[1]  The study’s authors – from Harvard and Mass General Hospital – conclude that current anti-physician-owned hospital restrictions should be re-evaluated. 


This confirms a 2006 Health Affairs study that dismissed concerns of financial conflicts of interest at physician-owned hospitals. This study stated, “If physicians’ ownership and incentives for profit were the primary driving factor in referring patients to specialty hospitals, we would expect to see different patterns of referrals among owners and non-owners, [however] we observed little differences in referral patterns.”[2]


Physician-Owned Hospitals Are Safe and Enhance Offerings in their Communities

The second false claim that the AHA and FAH use is that physician-owned hospitals represent a concern for patient safety and threaten community hospitals. These claims are as indefensible as the “cherry picking” myth.


Utilizing the Dobson | DaVanzo analysis, the AHA and FAH claim that physician-owned hospitals are “penalized for unnecessary readmissions at 10 times the rate of non-physician-owned hospitals.” However, their analysis only examined a portion of the physician-owned hospital industry and thus reaches a false conclusion. The following chart examines 235 physician-owned hospitals with Medicare provider numbers in comparison to 3,115 non-physician-owned hospitals.




Number of Hospitals



Percentage of Hospitals w/ NO Readmission Penalty



Source: CMS FY 2016 Hospital IPPS Final Rule and Correction Notice Public Use File


The data demonstrates that more than half of physician-owned hospitals received NO penalty at all, compared to only 19.5% of non-physician-owned hospitals – a fact conveniently omitted by the Dobson | DaVanzo analysis and the AHA and FAH.


The AHA and FAH continually assert that physician-owned hospitals do not provide emergency services. However, more than 150 physician-owned hospitals do provide emergency services. Physician-owned hospitals – like all hospitals – must comply with state law in order to maintain licensure and accreditation. Hospitals are licensed at the state level and some states require a hospital to contain an emergency department, while others do not. As part of the federal Medicare Conditions of Participation, each hospital is required to detail a plan for how emergencies and transfers are to be handled. If physician-owned hospitals were not in compliance with these requirements, they would lose their license or accreditation. That fact is that the AHA and FAH members do not all provide the same services, nor should they.


The attacks made on physician-owned hospitals regarding patient safety by the AHA and FAH are the epitome of hypocrisy. They hide the fact that medical errors are the third leading cause of death in the U.S.[3]  Patients are dying as a result of poor care in their hospitals at an alarming rate. There should be outrage but instead these organizations representing 95% of American hospitals lie about their competition to stifle alternative delivery models proven to be higher quality.


Not only do physician-owned hospitals not constitute a threat to patient safety, but they also do not harm community hospitals. A 2006 MedPAC study asserted, “Competitor community hospitals have had profit margins that are comparable to those of community hospitals located in markets without physician-owned specialty hospitals.”[4]


Furthermore, physician-owned hospitals do not harm communities or local economies at large. On the contrary, they provide a “greater level of net community benefits… than competitor hospitals,” according to a 2005 CMS analysis.[5] This study – which found that physician-owned hospitals provide between four and eight times the net community benefit of their not-for-profit competitors -  examined both uncompensated care costs and tax payments made by physician-owned hospitals.


Physician-owned hospitals are drivers of economic growth and stability in their local and state economies. An analysis conducted by Health Economics Consulting Group in 2009 before the ban on physician ownership was implemented found that “physician-owned hospitals, through their employment and capital expenditures, generate a total of $3.9 billion in economic activityin Arkansas, Indiana, Louisiana, South Dakota, Nebraska, Ohio, Pennsylvania and Texas alone.[6]  If H.R. 1156 is enacted, tens of thousands of jobs are expected to be created through private investment.


Physician-Owned Hospitals Provide High-Quality, Low-Cost Competition and Increase Patient Choice

In a nation where “nearly half of hospital markets… are highly concentrated,” and “no hospital markets are considered highly competitive,” [7] the organizations representing the primary drivers of market consolidation – large hospitals and health systems – should not attack new competitive entrants, because evidence clearly demonstrates that “increases in hospital market concentration lead to increases in the price of hospital care.”[8]


Finally, the industry represented by the AHA and FAH is now plagued by the negative impact on costs of care[9] and dismal physician professional satisfaction caused by hospital ownership of physicians. These organizations should not be vilifying entrepreneurial physicians who want to make decisions for their patients and how a hospital should operate.


Despite AHA and FAH’s unfounded claims to the contrary, physician-owned hospitals continue to lead the nation in quality of care, cost efficiency, and patient satisfaction. They provide a competitive alternative for patients who want the choice of where they receive care, and they preserve the doctor-patient relationship by giving physicians greater autonomy in patient care decisions. Why should a hospital be allowed to “own” a physician through employment, but a physician not be allowed to own a hospital?  It is simply un-American.


Physician-owned hospitals improve the quality of care, create jobs, and advance local and state economies. For these reasons, PHA urges Congress to lift the unjust ban on physician-owned hospitals and enact H.R. 1156, the “Patient Access to Higher Quality Health Care Act of 2017,” as part of any effort to repeal, repair or replace the Affordable Care Act.





Physician Hospitals of America

[1] The BMJ: Access, Quality, and Costs of Care at Physician Owned Hospitals in the United States: Observational Study

[2] Health Affairs: Specialty Versus Community Hospitals: Referrals, Quality, And Community Benefits

[3] The BMJ: Medical Error – The Third Leading Cause of Death in the US

[4] MedPAC: Report to the Congress – Physician-Owned Specialty Hospitals Revisited

[5] CMS: Study of Physician-Owned Specialty Hospitals Required in Section 507(c)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003

[6] Health Economics Consulting Group: The Economic Impact of Physician-Owned Hospitals in Eight States

[7] Harvard: Hospitals, Market Share, and Consolidation

[8] Robert Wood Johnson Foundation: The Impact of Hospital Consolidation - Update

[9] JAMA: Total Expenditures per Patient in Hospital-Owned and Physician-Owned Organizations in California


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