Negotiated and Cash Prices are Lower at Physician-Owned Hospitals

Commercial negotiated prices and cash prices for common hospital procedures were lower at physician-owned hospitals compared to facilities not owned by physicians in the same region, a study published in JAMA Network Open found.

Researchers assessed physician-owned hospitals located in hospital referral regions (HRRs) with at least one non-physician-owned general acute care hospital.

Using data published in compliance with the Hospital Price Transparency Rule, they analyzed prices for eight CMS-designated shoppable services: spinal injection, physical therapy – therapeutic exercise, magnetic resonance imaging (MRI) scan of lower spinal canal, computer tomography (CT) scan of abdomen and pelvis, comprehensive metabolic panel, blood test – clotting time, and emergency department visit levels three and four.

The final sample included 156 physician-owned hospitals and 1,116 non-physician-owned hospitals located in 78 HRRs. Physician-owned hospitals were smaller, more profitable, and more likely to be for-profit facilities. Physician-owned hospitals also treated fewer Medicaid patients and provided less charity care.

Most hospitals published commercial negotiated or cash prices for at least one of the eight common procedures. Median commercial negotiated prices and cash prices were lower for physician-owned hospitals than non-physician-owned facilities.

The difference in commercial negotiated prices between the hospital types ranged from -4 percent for blood test – clotting time to -33 percent for MRI of lower spinal canal. The only procedure where commercial negotiated prices were higher for physician-owned hospitals was comprehensive metabolic panel, with a price difference of 11 percent.

Median cash prices ranged from 5 percent (spinal injection) to 36 percent (CT of abdomen and pelvis) lower for physician-owned hospitals. Cash prices were 1 percent higher at physician-owned hospitals for level four emergency department visits.

For the same procedure in the same HRR, median commercial negotiated prices and cash prices at physician-owned hospitals were 33.7 percent and 32.7 percent lower than those at non-physician-owned hospitals, HRR-level regression revealed.

Hospital plan-level regression found that physician-owned hospital status was associated with 17.5 percent lower negotiated prices and 46.7 percent lower cash prices for the same procedure in the same HRR.

Past data has found that physician-owned hospitals also improve care quality.

One study conducted by ndp|analytics for Physician-Led Healthcare of America (PHA) found that physician-owned hospitals received higher patient experience ratings on the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey. These facilities had an average rating of 3.9, while the rating for hospitals overall was 3.2.

Physician-owned hospitals also generated $217 million in annual cost savings for Medicare, amounting to $1,100 to $3,000 per patient. The study indicated that physician-owned hospitals can help foster market competition and potentially limit healthcare consolidation.