I received a good question from a good friend of the blog, and I will try my best to answer it:
I would like to see some details about physician owned hospitals, why they are treated differently, if they are good or bad for healthcare in general, etc. The one we had Mobile Messball #1 and TummyTimeKing #2 at is nice for the few things it specializes in but sucks ass if you need emergency care, etc. Plus they spent the whole time bitching about obamacare and how it was screwing them.
Doctor owned hospitals are a distinct subset of privately owned hospitals. They are odd in a number of ways. Roughly 5% of the entire hospital universe in the US is doctor owned hospitals. These hospitals tend to be very small (less than 20 beds) and very specialized. The common specializations are Ob/Gyn, cardiology, plastic surgery and orthopedic surgery. As you’ll note, these are all high reimbursement specialties.
On average, a doctor owned hospital has a profit margin closer to that of a drug manufacturer (20% to 35%) compared to generally privately owned hospitals with profit margins of 5% to 7% and public hospitals with contribution margins of 2% to 5%. Some of that profit margin is due to cutting out the adminstrators and Vice Presidents of Institutional Awesomeness proliferation. Most of that increased profit margin is due to taking only patients who have good insurance who reimburse at high rates. This basically means people with plans that will be paying Cadillac taxes on it or millionaires paying out of pocket.
The upside of this system is that doctor owned hospitals tend to score very well on quality metrics (although we need to be aware of the law of very small numbers here) but they are expensive as all get out. A very plausible upside is that these hospitals tend to be extremely specialized so their staff gets really good at doing two or three things including sending patients elsewhere for anything outside of their expertise. There is good evidence that doing something more often leads to much better outcomes.
PPACA is not friendly to doctor owned hospitals.
PPACA has a clause that does not allow Medicare, Medicaid or CHIP to issue contracts to new doctor owned facilities or to continue contracts with current doctor owned facilities that expand their bed count or services offered. This basically freezes most of the doctor owned hospitals in place unless they are catering solely to the millionaire set.
The bright eyed, bushy tailed good policy reasoning behind this policy is that the doctor owned hospitals cherry pick healthy, well insured patients from the general population pool and then dump the expensive problems on public resources, so public resources should not go to this segment. Furthermore, these hospitals as a set have very high provider reimbursement rates, so it would be a cost savings measure.
The cynical bastard reasoning is that this is one of the bits that got the American Hospital Association on board with PPACA.
From the point of view of a doctor who owns his own hospital, PPACA has been an unmitigated clusterfuck.
They are facing the same pressures to adapt electronic health records, take part in Accountable Care Organizations (ACOs), manage some population health, and go through more gatekeepers and levels of review for high end care as as any other hospital. Since they are smaller, absorbing a new EMR system has a much higher per bed amortization cost with far less technical support, and their population is seldom large enough to engage in statistical management. They are seeing their high end insured payers cut back on benefits and reimbursements as more employer groups are looking for ways to either avoid or minimize their Cadillac tax exposure. They are severely limited in how they can change their business if they rely on any federal money to keep their revenue model solid with a high heads in bed count.
I don’t have a strong opinion on whether or not these hospitals are a good thing or not. If there is sufficient anti-skimming/anti-dumping measures in place, I could see a strong argument to allow MA/Medicare/CHIP payments to resume to new and expanded facilities as long as those payments were at regional averages instead of facility specific levels. I don’t think it is a great problem, but it could be something worth trading for something else in actual health policy-making.