Physician-Led Hospitals Advance Care Quality, Market Competition

Physician-led hospitals improve care quality and lower patient costs by driving market competition, making them an effective option to combat healthcare consolidation, according to a study conducted by ndp|analytics for Physician-Led Healthcare of America (PHA).

There are more than 250 physician-led hospitals in the US, most of which operate as community hospitals and are classified as acute care facilities. Some physician-led hospitals are critical access, psychiatric, or long-term hospitals.

Researchers used data from CMS and the Health Care Cost Institute’s Hospital Concentration Index to determine the economic and social benefits of physician-led hospitals. The index measures marketplace concentration in 182 metro areas across the country.

In 2020, 37 percent of metro areas had at least one physician-led hospital. These areas were more likely to have higher competition and lower market concentration, represented by a lower index score. For example, the average index score was 16.7 percent lower in areas with physician-led hospitals.

Additionally, only 4 percent of areas with physician-led hospitals were classified as very highly concentrated compared to 13 percent without physician-led hospitals.

“It’s not an accident that there’s a significant difference in hospital concentration between markets with and without those that are physician-led,” Frederic Liss, MD, president of PHA, said in a press release. “This study confirms that physician-led hospitals serve as a force multiplier, delivering high-quality and lower-cost care while fostering competition in areas of need. The presence of physician-led hospitals serves as an anchor to ensure that healthcare markets have a healthy balance of choices for patients.”

According to the CMS Medicare Spending per Beneficiary (MSPB) measure, physician-led hospitals offer a lower cost of care than other hospitals. Nearly 60 percent of physician-led hospitals had lower Medicare costs per beneficiary than the national median hospital in 2022, compared to 51 percent of all hospitals.

Physician-led hospitals generated $217 million in annual cost savings for Medicare, amounting to a cost savings of $1,100 to $3,000 per patient, the report noted.

Physician-led hospitals also received higher patient experience ratings on the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS), indicating better care quality. Physician-led facilities had an average patient experience rating of 3.9, while hospitals overall had a rating of 3.2

Moreover, 41 percent of physician-led hospitals received the highest rating in the category compared to 6 percent of hospitals overall.

Hospitals owned by physicians contributed to positive economic impacts in their local communities. For example, physician-led hospitals created over 166,000 jobs and produced $10.3 billion in wages in 2021. In addition, they generated $43.1 billion in economic output and paid around $1.2 billion in payroll and income taxes.

The report found that physician-led hospitals provided a significant amount of uncompensated care. According to 2018 data, the most recent data publicly available, these hospitals reported $240.1 million in charity care to CMS. This contributed to the total $546.2 million physician-led hospitals reported in uncompensated care.

Section 6001 of the Affordable Care Act of 2010 amended section 1877 of the Social Security Act, which now states that physician-owned hospitals are generally prohibited from expanding facility capacity.

“It is clear that physician-led hospitals serve as a vital piece of many communities across the United States. It’s time for Congress to remove the arbitrary expansion restriction on physician-led hospitals so that they can evolve to adapt to the needs of their growing communities,” Liss said.

“The federal government allows numerous segments of the healthcare delivery system to have physician ownership due to the quality of care and efficiency that it creates for patients. Ambulatory surgery centers, imaging, physical therapy, and value-based arrangements are just a few of the segments that are allowed to have physician ownership. Eliminating this archaic provision that prevents the same for hospitals is urgently needed.”