Issue: May 2018
May 16, 2018
4 min read

Is it time to end the Affordable Care Act’s restrictions on physician-owned hospitals?

Issue: May 2018
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Click here to read the Cover Story, "Specialty, physician-owned hospitals prepare for change."


POHs provide superior care at lower cost

Due to concerns regarding higher cost of care and financial conflicts of interest, the ACA placed a moratorium on the expansion of POHs in 2010. Supporters of these restrictions argue POHs “cherry-pick” only the healthiest of patients and maintain that POHs do not improve patient outcomes or cost efficiency. The current literature, however, does not justify this moratorium on regulation of hospital ownership. We can all agree current reform efforts should focus on improving value in our health care system. Our policymakers should be passing legislation that focuses on improving the quality of care while reducing costs.

P. Maxwell Courtney, MD
P. Maxwell Courtney

In a recent study in the Journal of Bone and Joint Surgery, we evaluated Medicare costs and outcomes of primary TJR among 45 POHs and 2,657 non-POHs across the United States. The data showed POHs had lower mean Medicare costs and lower risk-adjusted complication rates than non-POHs. POHs outperformed non-POHs in all patient satisfaction metrics, as well. What sets these POHs apart? Physicians have increased involvement in hospital governance and decision-making in their facilities to provide superior, cost-effective orthopedic care.

Craig J. Della Valle, MD
Craig J. Della Valle

To achieve our universal policy goal of providing value in orthopedics, physicians should be allowed to own and manage hospitals that have been shown to provide efficient, higher-quality care at a lower cost.

P. Maxwell Courtney, MD, is an assistant professor of orthopedic surgery with Rothman Institute at Thomas Jefferson University in Philadelphia.
Craig J. Della Valle, MD, is the division chief of adult reconstruction and a professor of orthopedic surgery at Rush University Medical Center in Chicago.

Disclosures: Courtney and Della Valle report no relevant financial disclosures.


POH policy working as planned

For almost 2 decades, Congress has grappled with overutilization and higher health care costs caused by self-referrals to POHs. Conflicts of interest are inherent in these arrangements.

Jeff E. Cohen
Jeff E. Cohen

More than 8 years ago, after a decade of studies and Congressional hearings showing the adverse impact of these arrangements, Congress acted to protect the Medicare and Medicaid programs, and the taxpayers that fund them, by imposing a prospective ban on self-referral to POHs.

It is a carefully crafted policy with an important safeguard that permits limited expansion of grandfathered hospitals to meet demonstrated community need. Several POHs, in fact, have met the requirements and are currently on the path to expand. However, some continue to push to repeal the law. Doing so would harm patients, community hospitals and local businesses. A recent analysis by the health care economics consulting firm Dobson | DaVanzo found that POHs:

  • “cherry-pick” patients by avoiding Medicaid and uninsured patients;
  • treat fewer medically complex patients;
  • enjoy all-payer margins nearly three-times those of non-POHs;
  • provide few emergency services, an important community benefit; and
  • experience the maximum readmission penalty at ten times the rate of non-POHs.

In short, the dangers of self-referral remain. The foundation for current law must be fortified, not weakened. The policy is working exactly as planned to ensure a more level playing field — one that protects patients and promotes fair competition. It is vital that it be maintained.

Jeff E. Cohen, is the executive vice president, public affairs, for the Federation of American Hospitals and manages advocacy, public affairs and communications for the investor-owned hospital industry.

Disclosure: Cohen reports he is an employee of the Federation of American Hospitals.


Specialty hospitals: A disruptive innovation

Neil Badlani, MD, MBA
Neil Badlani

Specialty POHs are patient-centered and physician-friendly health care alternatives that take advantage of the economic efficiencies of specialization. From a medical standpoint, these provide a higher quality of care and increase patient and physician satisfaction.

Health care is becoming an increasingly consumer-driven industry. The increased access to information through the internet and direct-to-patient advertising, combined with shifting the financial burden to patients in the form of higher deductibles has led to increased consumerism in health care. Patients are more actively involved in choosing their health care and specialty hospitals fill this need for high-quality, consumer-oriented centers of care.

These hospitals provide a high quality of care because these focus on their specialized core competency, which promotes learning and improvement of these specific processes. These have a higher nurse-to-patient ratio and the entire staff, including nurses, therapists and anesthesiologists, are more specialized.

The data support this higher quality. Cram and colleagues studied more than 51,000 THAs and 99,000 TKAs in 38 specialty hospitals and 517 general hospitals. After adjusting for patient severity and procedural volume, they found the odds of adverse outcomes were significantly lower in specialty hospitals.

Economically, these hospitals are more efficient and more profitable than general hospitals. Their smaller size and lesser hierarchy generally leads to more focused and consistent management goals, and better alignment of incentives of managers and providers. These also have a positive impact on society through the taxes paid and the beneficial aspects of the competition these provide to general hospitals. Their ability to provide a disruptive innovation to the existing hospital industry will lead to lower costs and greater access to health care.


Competition between specialty and general hospitals has provided added value to the patient and taxpayer. However, physicians must take more responsibility in their appropriate and ethical leadership. It is critical to recognize the financial conflicts of interest, disclose ownership and act ethically. Patient care cannot be compromised. With thoughtful and efficient leadership, specialty POHs can be an integral part of improving health care in this country in the long run.

Neil Badlani, MD, MBA, is director of spine surgery at The Orthopedic Sports Clinic in Houston.

Disclosure: Badlani reports he is chief medical officer of Nobilis Health Corp., from which he receives a salary and stock options.