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Health Reform Could Put End to Physician-owned Hospitals

Liz Jones, January 14, 2010

If passed as is, the Senate's current healthcare reform bill will put physician-owned hospitals on the endangered species list. Under the bill, physician-owned hospitals must meet a list of five "allowable growth criteria" if they want to continue receiving Medicare and Medicaid funding.

That doesn't sound horribly unreasonable until you learn that not one existing physician-owned hospital will be able to meet those criteria, says Molly Sandvig, Esq., executive director of Physician Hospitals of America (PHA), a Sioux Falls, SD-based advocacy group for the physician-owned hospital industry.

Some lawmakers are eager to put the kibosh on physician-owned hospitals because of a debate that has been raging in the field since physician-owned hospitals started cropping up in the 1990s. Opponents, including the American Hospital Association, believe that physician-owned hospitals enable physicians to perform unnecessary procedures so they can pocket more profit, says Terry Woodbeck, CEO of physician-owned Tulsa Spine & Specialty Hospitals.

Naysayers also fear that physicians with an ownership interest in a hospital will refuse to refer patients to other hospitals, even if doing so is in the best interest of patients.

Woodbeck disagrees with these arguments.

"Physicians live on physician referrals. If you get the reputation that you are a cutter, your referrals are going to dry up quickly and you are going to be nailed with a number of malpractice suits for doing unnecessary surgeries," he says.

Woodbeck adds that physician-owned hospitals provide some of the highest quality patient care in the country, and are a venue in which physicians and hospital administrators can align their financial interests to reduce the cost of care.

Regardless of the political motivations behind imposing growth restrictions on physician-owned hospitals, they will have a serious impact. Physician-owned hospitals that do not meet the five criteria would not be permitted to add beds and services to meet their communities' needs.

"If you can't grow and meet market demand, you become stagnant. You either sell your hospital, thus dissolving the physician-ownership model, or you go bankrupt," Sandvig explains.

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