House bills would lift ban on physician-owned hospitals

The legislation would reverse a provision in the health reform law that effectively prohibits new doctor-owned hospitals from forming and stops existing facilities from expanding.

By David Glendinning — Posted March 31, 2011

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House lawmakers have introduced two pieces of legislation that would rescind a provision in the health system reform statute designed to stop the spread of physician-owned hospitals.

Separate bills introduced by Reps. Doc Hastings (R, Wash.) and Sam Johnson (R, Texas) would repeal Section 6001 of the Patient Protection and Affordable Care Act. The provision barred new physician-owned hospitals from obtaining Medicare certification starting Jan. 1, and it placed strict limits on existing hospitals that seek to expand their footprints or take on new physician investors beyond where they were at the time of the law's enactment.

Physician hospital advocates said the move was crippling to an industry that provides high-quality, specialized care to millions of patients. Physician Hospitals of America, which represents many of the facilities, said the issue goes beyond the 275 doctor-owned hospitals that are in operation.

"Much-needed expansion projects were halted at over 30 existing hospitals, and more than 40 hospitals are in a state of uncertainty because they were not certified by Medicare in time to meet the [Dec. 31, 2010,] deadline," said PHA president Michael E. Russell II, MD. He's an orthopedic spine surgeon at Texas Spine & Joint Hospital, a wholly physician-owned orthopedic care facility in eastern Texas. "Passage of this legislation would undo the harm to communities imposed by the current law, help improve access to quality health care services, preserve the right of patients to choose where they receive their health care and protect much-needed jobs during our down economy."

The American Medical Association and other medical organizations support physician ownership of hospitals and are backing efforts to repeal the ban in the reform law. They say doctor-owned hospitals introduce healthy competition to the marketplace, increase high-quality care choices for patients and give physicians an alternative to more traditional hospital employment arrangements. Advocates of the hospitals note that the reform language targeted not just specialty hospitals, but also multispecialty hospitals, acute care facilities and even some community hospitals being supported by physician investors.

But community hospital backers, such as the American Hospital Assn., say the doctor-owned facilities pose a threat by siphoning off more profitable patients and straining the wide range of vital services provided by the larger community facilities. They also stress an inherent conflict of interest whenever a physician owner refers a patient for treatment at a hospital in which he or she has a financial interest.

The Hastings bill, which at this article's deadline had a bipartisan list of 10 co-sponsors, also would repeal reform law language requiring drug and device makers to report all payments they make to physicians as well as to disclose any physician ownership in their firms.

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