Doctor owned hospitals: Are the rich getting richer?

It was bound to happen.

By “it,” I mean that the small group of specialty hospitals (usually orthopedic or cardiology-focused) across that country that are owned by doctors were going to have their “See! We Told ‘ya so!” moment.

Doctor-owned hospitals. How many are there? Two hundred and thirty-eight of them in the whole country (out of more than five thousand)–somewhere between four and five percent of the total in the U.S. (numbers courtesy TA Henry from this excellent piece).

What are the issues?

  1. Obamacare effectively bans doctors from owning hospitals in the U.S.
  2. Those already in existence are grandfathered in under the law.
  3. We know that doctor-owned hospitals have higher average costs–hence the rationale for banning them under a law with the intent of “bending the cost curve.”

In the most recent Medicare data (December 2012 report on “value-based purchasing“), doctor-owned hospitals did well in terms of achieving quality milestones.

How well?

Really well. Physician-owned hospitals took nine out of the top ten spots in the country. And in spite of their low relative number, forty-eight out of the top one hundred.

What’s the secret sauce? Here’s a little tidbit on the #1 ranked hospital from another excellent piece on this issue:

The top one is Treasure Valley Hospital in Boise, Idaho, a 10-bed hospital that boasts a low patient-to-nurse ratio and extra attention, right down to thank-you notes sent to each discharged patient.

A 10-bed hospital? Thank you notes for each discharged patient? Sign me up to go there next time I need hospital services.

Who cares? Well, we all should. Why?

It boils down to incentives.

When doctors own the hospitals, they stand to directly share in profits. If you’re a doctor-owner, and the hospital you both run and own is functioning at a high level, you think, “This is what America is all about. Free enterprise. Why shouldn’t I make more money if my hospital runs well?”

As a taxpayer, do I want government incentives going to hospitals that are privately owned and known for cherry-picking insured patients?

Moreover, what does it say about public hospitals, or academic centers, that often see the sickest, poorest, most vulnerable patients? Yes, their quality is measurably lower, according to this data. But now, in spite of staying true to their core missions (serving the public) they’re being further penalized.

Is this just another case of the rich simply getting richer?

Maybe Obamacare’s got it wrong. Maybe we should build upon the model of doctor-ownership and turn over public hospitals to their workers. All of them. Let the nurses buy in. And the food handlers. And the “environmental services” folks (i.e. custodial crews). Let’s really let the workers own the means of production. Then we can see where incentives get us.

John Schumann is an internal medicine physician who blogs at GlassHospital

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  • Guest

    Is it any better to have non-MD CEOs and administrators at hospitals? I guess I struggle to see why physician owned hospitals are worse than any other private party owning a hospital. The owners are in it for profit; that’s the bottom line.

    Cherry picking patients is wrong, but this is absolutely not exclusive to physician owned hospitals. And as we move towards hospital compensation being tied to patient satisfaction watch for this trend to worsen. The losers will be the hospitals you mention – those caring for the underserved and poor. Don’t blame the docs – blame the government!

    It’s harder to control and exploit physicians at physician owned hospitals. Is that the government’s issue with them?

  • Mengles

    “As a taxpayer, do I want government incentives going to hospitals that are privately owned and known for cherry-picking insured patients” — And you don’t think private hospitals don’t do the same thing? Really?

  • Rules4Radicals

    There are 5724 hospitals in the USA, of which a mere 238 are physician owned.
    An astonishing 9 out of the top 10 highest quality, and half of the top 100 highest qualty hospitals, are from this tiny pool of MD owned facilities.
    So if the misnamed “Affordable Care Act” had any real interest in quality of care, there would be encouragement of more physican ownership of hospiatls. (Hint: The ACA worsens health care quality).

    • Mike

      In the Statist’s idea world, it would be the Government and its Cronies running the entire healthcare system, not doctors. The ACA is aiming in this direction.

  • Dorothygreen

    The ACA has many flaws, but has some very good points. But as long as the Bigs – specialtiy medicine, Pharma, for – profit insurnace for basic sevices and market driven hospitals, it will not bend our health care cost curve.

    The endless wraggling over points like physicians owning hospitals are distractions from what must be done. Everything is made so difficult because we have the Bigs setting the prices – mastercharge, no discount on drugs, brand named vs gereric drug battles, insurance endlessly raising rates to maintain their high adminsative costs. Many of these points have made there way to the public. Is anyone paying attention?.

    Another health care area where the Bigs are in control is our food. Yes. Big Ag and Big food are right there in the lobby with the Medical industrial complex bigs. This is so because the Standard America diet is the root cause of the preventable diseases that eat up over 50% of our health care costs and hence, reap high profits from – individual insurance premiums and income taxes. Instead some politicians blame in seniors.

    This is an America travesty as big as the “too big to jail Banks” – because they all have a hold over us – by being in colusion with the ability to cause serious economic damage if they don’t have it “their way”.

    We the people need to do two things for our health as a country

    !. Adopt the Switzerland model – This would mean that all prices – physician, hospital, insurance rates, equipment and Phara – for essential services are negotiated up front with the government and private insurance for basic services would be outlawed. The government would be responsible for monitoring for fraud and abuse and subsidies to insurance companies according to income. No lawyer driven arbitration for wrongful doing. Again, here the government does the negotiation. All patients are expected to be responsible for the use of services. YES! every other country in the world outlawss private insurance and negiates prices for essential services . Physicinas, , hospitals, equipment, Pharma and insurance companies make their profits on suppemental services -private rooms, perks, TV in rooms, massage, concerige services, less administrative detail etc. No country has a “perfect health care system” but the US is 37 on the WHO in overall factors – worst outcome stats, wasted money, greed, fraud.

    2. Make unhealthy food more expensive than healthy food. Adopt the “tobacco model (call it RISK ) for a tax on the riskest substances in our diet – sugar, unnatural fats, refined grains, corn fed meat. Stop the ads for High RISK food items. Put the RISK money into health care – primary prevention – education, and more education, commuity programs (many are sprouting up around the country on a volunteer basis), change the farm bill from a profit Bill to a “healthy affordabe food for all” bill. That vegetables and fruits are a speciality product is ludicrous

    It can be done. We have the tools. But we need millions of foot soldiers with sling shots of knowledge and commitment to stop Goliath.

    • Mike

      “the Standard America diet is the root cause of the preventable diseases that eat up over 50% of our health care costs”


  • Guest

    Hahaha. The administrators at my hospital make much more than the lowly hospitalists and intensivists, the physicians who manage the brunt of the patients. They often have minimal education and parade around in their white coats as if they know anything. One confrontation regarding clinical medicine and they will dash back into their office where they can send important emails about what kinds of scrubs we will be ordering next quarter!

    The “rich” are not the doctors, and you know it. Doctor owned hospitals are a tremendous thing because people who actually know medicine are running facilities with patient care, quality and good outcomes in mind. Doesn’t it just chap your hide? Know nothing administrators like yourself should be making all the money, not these damned doctors. Sorry your feelings are hurt.

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