NCPA - National Center for Policy Analysis


February 22, 2006

Congress recently extended a three-year study on the controversial physician-owned hospitals, meanwhile halting their enrollment as health care providers in Medicare and Medicaid until the study's completion. This threatens the very survival of the new industry as investors lose forgone Medicare and Medicaid profits, says Business Week magazine.

Consider the controversy over the more than 100 physician-owned specialty hospitals:

  • One community hospital's cardiac division net profits went from $524,646 to $20,786 a year after a private heart facility opened nearby.
  • Critics fear nonprofit hospitals bear the burden of uninsured patients when specialty hospitals reject them.
  • Doctors perform unnecessary procedures; for example, Arizona's physician-owned hospitals performed routine heart surgeries on 21 percent of otherwise healthy patients, compared with 10 percent in the state's other hospitals.
  • Overall health care costs increase by spurring demand for pricey elective surgeries.

Supporters of physician-owned hospitals stress their quality and efficiency. For instance, physicians invest in more nurses and high-tech gear. In addition, specialty hospitals perfect one area of expertise, usually in lucrative practices such as orthopedics and cardiac care. Critics argue that physicians at doctor-owned hospitals have an incentive to make every case profitable; however, most doctors rarely hold more than a three percent stake in the facility, says Business Week.

The congressional study will address the conflict-of-interest concerns by scrutinizing how physicians structure their deals and how such hospitals treat uninsured patients.

Source: Arlene Weintraub, "Should Doctors Own Hospitals?" Business Week, February 20, 2006.


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