Physician Owned Hospitals

Overview of Study

Federal law enacted in 2010 as part of the ACA prohibited creation of new Physician-Owned Hospital (POHs) and effectively banned expansion of existing POHs. The prohibitions were enacted amidst intense lobbying by “traditional” corporate hospital interests who argued that physician ownership of hospitals would increase costs.  PAI partnered with the Physicians Foundation to study the cost effectiveness of POHs, engaging Robert Aseltine, PhD, Professor and Chair, Behavioral Sciences and Community Health at UConn Health, to conduct an independent review.

This study evaluated patient-level Medicare fee-for-service claims data from 2019 Medicare data to calculate total payments for the 20 highest cost DRGs treated in (POH) facilities. Researchers then analyzed the total payments for those 20 DRGs in traditional (non-POH) hospitals in the same geographic areas.

This research provides important new data that suggests significant potential savings to the Medicare program when hospital services are delivered in POHs. This data also debunks the often-repeated mantra that physician-led delivery costs more, highlighting efficiencies in allowing clinicians to organize care delivery in today’s marketplace.

Key Findings Identified 8-15% Savings per DRG for Similar Patients in the Same Geographic Area

• For each of the 20 highest cost conditions treated by POHs, total spending was between 8-15% lower than in traditional hospitals within the same market for relatively the same Medicare patient population by patient characteristics.
• These lower costs in POHs translate to substantial potential annual savings to Medicare and Medicare beneficiaries. The study concludes that “total payments in 2019 would have been reduced by approximately $1.1 billion if services for the 20 DRGs were performed in POHs instead of traditional hospitals.”
• POHs offer an opportunity to achieve considerable system-wide savings across a range of health conditions and patient populations
• The research found no evidence of so-called “cherry-picking.” Researchers found that the patient age, race and ethnicity and comorbid medical conditions were very similar in POHs and traditional hospitals.

Download the Full Study (PDF), Research Brief (PDF) and Press Release (PDF)