Lifting ban on physician-owned hospitals can improve American health care

All Americans deserve access to affordable, high quality health care. We all agree on that, but how you get there drives fierce debate. One thing is clear — a strictly government-run health care system (e.g., “Medicare For All”) that is built on false promises of “free,” high quality care that allows patients continued freedom of choice and rewards doctors for exceptional care is not financially sustainable, nor realistic.

Instead, we must champion the “magic” of competition in health care. In fact, it isn’t “magic” at all. Competition is a central concept in economic theory and has been shown to work across industries to foster innovation, drive down cost, and improve quality. Health care is an industry that needs competition now more than ever.

We must begin to solve the competition crisis in health care, and physician-owned hospitals (POHs) are a great starting point. But it will need Congress to reverse prior legislation that artificially squashes competition in health care.

Passed in 2010, the Affordable Care Act (ACA) contains Section 6001. In essence, Section 6001 of the ACA bans new POHs, the culmination of progressively more restrictions on POHs that began about 20 years ago.

So, while lawyers own law practices, doctors can’t own their own hospitals to optimize clinical care for patients. Seems wrong, doesn’t it?

As with many policy decisions, the idea behind the policy banning POHs and the goals of the policy do not align with what actually happened once the policy was implemented. The reported reason for the policy was the concern that doctors who have financial stake in a hospital will simply refer the most financially lucrative patients to their own facilities, threatening patient safety and driving up cost at the same time.

What really happened? Less competition and all its related negative side effects.

The forced decrease in health care delivery competition hurt patients a lot. At the same time as POHs were removed from the competitive health care delivery landscape, hospital consolidation continued, prices increased, quality improvement lagged, and patient experience declined. In fact, many of the concerned negative repercussions about POHs were playing out across non-POHs, as referral patterns are motived by market forces regardless of ownership. Ultimately, the opposite of the benefits of competition were — and continue to be — felt across health care because of the ban on POHs.

Recent research from the Mercatus Center at George Mason University also shows that the major concerns that led to the ban of POHs in the first place were likely unfounded. In general, POHs actually function as good as, if not better, than non-POHs. Often, POHs provide higher quality care at lower costs. This helps our fellow Americans get back to their daily lives quicker, allowing them to spend time with family and contribute to the economy. That’s exact what we want — and need — to help “fix” our broken health care delivery system! But we are getting in our own way.

When we step back and consider these positive findings, they make sense. POHs — including those focused on orthopaedic surgery or other medical subspecialties — can focus solely on what they do best, creating true integrated practice units (IPUs) that provide patients a “one-stop shop” for care. This makes care delivery efficient and higher quality, while also improving patient satisfaction. This is a win for all stakeholders, but especially patients, who are the most important piece of the health care delivery puzzle.

As we strive to solve our health care system crisis by refocusing health care back on the patient-doctor relationship, a competitive health care marketplace is essential. In fact, increased hospital competition has bipartisan support, including from President Biden. It is now time to put political differences aside and pass proposed legislation by a group of Republican Senators to repeal Section 6001. This is an easy Bipartisan decision to make, and it cannot come a moment too soon.

David N. Bernstein, MD, MBA, MEI is a resident physician in the Harvard Combined Orthopaedic Residency Program at Massachusetts General Hospital, Brigham and Women’s Hospital, Beth Israel Deaconess Medical Center, and Boston Children’s Hospital. He is an expert in value-based health care transformation. Follow him on Twitter @DNBernsteinMD The views of this editorial are solely that of the author.