Will Trump Administration End Crackdown on Doctor-Owned Hospitals?

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By Victoria Pelham

Doctor-owned hospitals and the lawmakers that back them are latching on to a chance to rid themselves of tough restrictions on the hospitals’ growth.

The Affordable Care Act blocked new facilities owned by physicians from Medicare participation and disallowed most expansions of existing ones unless they qualify for exceptions such as by serving many Medicaid patients. The largest hospital lobby wants the restrictions left as is, noting that doctors’ stake in the services at these facilities often leads to “cherry-picking” care just for the healthier, richer, and better insured. That in turn strains the safety net and inflates costs at other community hospitals, the American Hospital Association warns.

But Reps. Sam Johnson (R-Texas) and Michael Burgess (R-Texas), a former doctor, are questioning the limitations amid concerns over choice as more health-care systems consolidate.

“Having more hospitals in the marketplace is beneficial for patients who are seeking care and need a range of options,” Burgess told Bloomberg Law in a statement. Congress “must examine areas that can serve as a solution to some of these issues, such as the moratorium on physician-owned hospitals.”

“I remain perplexed by the notion that hospitals can purchase physician groups and services, but physicians cannot own hospitals because of the two letters after their name,” he said .

The number of doctor-owned hospitals grew from 46 in 2002 to more than 200 today, according to the AHA. They include several in Texas such as the Texas Health Presbyterian Hospital.

Rule Scale-Back Possible

Will those looking to roll back the restrictions find a favorable ear in the Trump administration?

New Health and Human Services Secretary Alex Azar at a recent congressional hearing may have indicated he’s willing to take a look at the issue. He pledged to work on “any changes that we can make” to allow for competition and provide care at the most value for its price.

Azar told lawmakers questioning him that doctor-owned hospitals offer “effective competition” in the marketplace and “superb quality care” to patients.

“We ought to be inspiring competition among providers,” he said at a Feb. 14 House Ways and Means Committee hearing on the fiscal 2019 budget request.

The Physician Hospitals of America told Bloomberg Law the group is “ready to work with Secretary Azar to restore competition to the hospital marketplace.”

“The moratorium on physician-owned hospitals should be lifted, so that more patients are able to benefit from the higher quality, lower cost healthcare these physician led facilities provide to their local communities,” Executive Director John Richardson said in a statement.

Herb Kuhn, president of the Missouri Hospital Association and a former CMS official, told Bloomberg Law that the health-care sector needs to be closely watching this space once again. The first signs of any action would likely come in the Centers for Medicare & Medicaid Services inpatient prospective payment system rule this spring, he said.

Kuhn also sits on the Medicare Payment Advisory Commission and on a Bloomberg Law advisory board.

The CMS issued a request for information last spring looking for input on the role these types of hospitals should play in health care and how the ACA’s limitations on them are affecting care—especially for Medicare patients.

Separately, Rep. Johnson last year introduced a bill that would overturn the limits on doctor-owned hospitals.

He told Azar at the hearing that the law as it stands “prevents some of our best hospitals from expanding to better serve our communities, such as those in my fast-growing district, and I believe that’s wrong.”

Richardson added that these hospitals don’t cherry-pick patients but treat “similar patient populations” to competitors, according to a study done by Massachusetts General Hospital.

“Our opponents continue to spread mistruths about our industry... PHA will continue to fight the mistruths, and fight for Medicare and Medicaid patients, so they can have greater access to these centers of excellence—physician-owned hospitals,” he said.

Equal Access

The AHA has opposed Johnson’s bill and any proposals that would reverse the ACA’s position on self-referrals at hospitals owned by doctors. The group represents nearly 5,000 hospitals, including those owned by some of the nation’s largest hospital systems.

“When physicians are allowed to self-refer patients, they tend to send the healthiest and wealthiest patients to their own facilities,” Erik Rasmussen, AHA’s vice president of legislative affairs, told Bloomberg Law. “This cherry-picking of healthier, better-insured patients erodes the health-care safety net, unfairly leaves other hospitals with higher costs, and can jeopardize access to critical services in many communities.”

Doctor-owned hospitals also tend to rarely offer emergency services, instead relying more on more profitable care including heart or orthopedic surgery, according to the group.

Further, doctor self-referral translates to more medical services and higher Medicare costs, the hospital association says. The restrictions had wrought savings that would curb the national deficit by $500 billion over 10 years, according to Congressional Budget Office figures cited by the AHA.

Kuhn told Bloomberg Law that these hospitals, where doctors can self-refer medical services to themselves, tend to take fewer Medicaid and Medicare patients.

“What we would hope is when they do this evaluation they also look at that issue to make sure these organizations really provide a good balance in the marketplaces, are taking all comers, and [are] providing equal access to anybody seeking health-care services—both Medicaid, Medicare, and ultimately the uninsured,” he said.

To contact the reporter on this story: Victoria Pelham in Washington at vpelham@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

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