Robert A. Dowling, MD1; Mara Holton, MD2
1 Dowling Medical Director Services, Fort Worth, Texas
2 AAUrology, Annapolis, Maryland
Background: Physician-owned hospitals are sometimes characterized as examples of inappropriate self-referral. This perception contributes to legislation and regulation that constrain physician ownership. The true scope of physician ownership and its impact are incompletely understood. This study aimed to better define the current landscape of physician ownership in US hospitals to inform policy making in this area.
Methods: Publicly available data files from the Centers for Medicare & Medicaid Services on hospital ownership and physician demographics were combined to analyze physician ownership in US hospitals.
Results: In the United States, 41% of hospitals have some element of physician ownership; the most common ownership roles are director and officer, not general or limited partnership interest. The most common specialties of physicians who own hospitals are family practice and internal medicine. Only 0.4% of physicians and 1.3% of urologists in the United States can be linked to any ownership role in US hospitals.
Conclusions: Physician ownership in hospitals is uncommon. The potential benefits of physician-owned hospitals can be better studied with expansion of physician ownership, which is currently prohibited by law.
KEYWORDS:
Ownership; financial management, hospital; hospitals, proprietary
Physician-owned hospitals are defined in US federal regulations (CFR §489.3) as “any participating hospital (as defined in § 489.24) in which a physician, or an immediate family member of a physician (as defined in § 411.351 of this chapter), has an ownership or investment interest in the hospital. The ownership or investment interest may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in the hospital.”1 For years, physician-owned hospitals have been at the center of efforts to regulate physician self-referral (since the Ethics in Patient Referrals Act, also known as the Stark Law, of 1989). Until 2010, physicians were able to own hospitals under the “whole hospital exception.” Congress closed that exception in 2010 with the Patient Protection and Affordable Care Act, banned new ownership, and limited expansion of grandfathered physician-owned hospitals. Recently, legislation has been introduced in both chambers of the US Congress that would reverse these provisions and allow new and expanded physician ownership of hospitals.2,3 Opponents of this legislation include the American Hospital Association, which argues that physician-owned hospitals have higher readmission rates and report fewer quality measures than other hospitals.4 Proponents of physician-owned hospitals argue that they increase competition, improve quality, and generate savings and efficiency.5 The Centers for Medicare & Medicaid Services recently updated its information about hospital ownership.6 In this article, we review the current landscape of physician ownership in the nation’s hospitals, with a focus on the specialty of urology.
Two publicly available data sets were accessed to prepare this article. The Doctors and Clinicians national downloadable file, last updated in January 2024, contains information about every health care professional (HCP—ie, physicians and others) enrolled in Medicare, including their specialty.7 The Hospital All Owners Information data set provides information about all owners of hospitals and was also last updated January 2024.6 These data include ownership name, ID, type, address, and effective date. These files were linked on a common identifier to examine ownership by HCP or organization type, specialty, and location.
In January 2024, the Centers for Medicare & Medicaid Services reported ownership information for 5221 hospitals in all 50 states and 7 US territories. Hospital ownership is complex; most hospitals have more than 1 owner, many owners own more than 1 hospital, and some owners have more than 1 role in any single hospital. Owners linked to hospitals include individuals and organizations with various roles, as depicted in Table 1. The most common role for an individual owner is director, and most individual owners in this data set are not HCPs. The most common role for an organizational owner is operational or managerial control. Among 5221 hospitals, 2124 (40.7%) have some sort of HCP ownership, and 4434 (84.9%) have some sort of organizational ownership. Organizational ownership is held by many types of entities, including corporations, financial institutions, and medical service organizations (Table 2). These categories are not mutually exclusive.
The most common specialties of physician owners in US hospitals are family practice and internal medicine (primary care), which together comprise more than one-quarter of physician ownership. Orthopedic surgery ranks third (9.5% of owners), and urology ranks 10th (2.5%) (Table 3). Urologists have some ownership role in only 111 hospitals in the United States (5.2% of hospitals with physician owners and 2.1% of all hospitals). The ownership profile of those 111 hospitals is shown in Table 4, and the ownership role information is provided in Table 5. In those hospitals where ownership is held by urologists, urology is the dominant specialty of physician owners (Table 6).
Our analysis confirms that physician ownership in hospitals today is extremely limited. A minority of hospitals in the United States have any sort of Medicare-covered HCP ownership, and only 4827 of 1 295 189 Medicare-covered HCPs (0.37%) have any ownership role in those hospitals. Most roles are directors or officers, and only 827 Medicare-covered HCPs are reported to actually have a role with interest. A total of 122 of 9666 urologists (1.3%) in the Doctors and Clinicians national downloadable file have an ownership role in 111 hospitals, and 38 urologists have a limited or general partnership interest in just 8 hospitals (Table 7). The small number of physician-owned hospitals and the limited role of physicians in hospital ownership may be caused in part or in whole by the regulatory environment.
Arguments for expanding physician ownership in hospitals are based in part on evidence that consolidation (non–physician-owned hospitals) in medical markets is associated with increased costs and worse outcomes8 and that physician-owned hospitals can increase competition and lower prices. Even with the small numbers of current physician-owned hospitals, there is some evidence to support this thesis. One analysis of 216 physician-owned hospitals matched with comparator non–physician-owned hospitals in the same market compared costs for the 20 most expensive diagnoses (diagnosis related groups) and found 8% to 15% lower costs in the physician-owned hospitals.9 Wang et al10 found that commercial prices were lower in physician-owned hospitals than non– physician-owned hospitals in the same market. Hayford11 found that hospital mergers were associated with increased use and worse outcomes for heart surgery. Hospital costs represent the largest category of health care spending in the United States.12 Taken together, these findings suggest that removing restrictions and expanding physician-owned hospitals could substantially lower US health care costs and improve outcomes.
A counterargument made by some is that physician-owned hospitals cannot be fairly compared with non–physician-owned hospitals because the latter tend to render more uncompensated care and care for sicker patients. Others have found that these demographic and comorbidity differences do not account for price differences between physician-owned hospitals (less expensive) and non–physician-owned hospitals (more expensive).9 This remains an unsettled question that may require more physician-owned hospitals in more markets for meaningful comparisons to be made.
An analysis of this data set comes with several limitations. It is not possible to accurately determine the ownership stake of physicians in hospitals; although some entries include this information, most do not. In some cases, ownership portions reported for a single facility add up to more or less than 100%.
Second, this file contains names of corporate owners of hospitals but not the owners of those corporations. It is possible that physicians hold interests in some of these organizational owners that are not directly apparent in this data set, which could result in underestimating physician ownership in a hospital. Finally, the methods used in this analysis do not allow for the identification of family members who directly or indirectly have an ownership role in hospitals.
Physician-owned hospitals today make up a small fraction of the US hospital market, despite some evidence that they deliver better and less expensive health care than non–physician-owned hospitals. Most non–physician-owned hospitals are owned and governed by corporate entities, with limited physician guidance. Legislative reforms that allow for expansion of physician-owned hospitals and greater ownership control by physicians have the potential to improve outcomes, lower costs, and increase understanding of the benefits and risks of physician ownership.
Published: March 31, 2024.
Conflict of Interest Disclosures: Dr Dowling is a LUGPA consultant. Dr Holt is chair of the LUGPA Health Policy Committee.
Funding/Support: No funding was received for this study or article.
Citation: Dowling R, Holton M. Physician-owned hospitals: a look at the numbers. Rev Urol. 2024;23(1):e81-e89.
Corresponding author: Robert Dowling, MD, Dowling Medical Director Services, 3800 Ridgehaven Rd, Fort Worth, TX 76116 (rdowling8@gmail.com)