Physician-Owned Hospitals

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The issue of self-referral to physician-owned hospitals and the inherent conflict of interest it presents have been a concern for policymakers for well over a decade, which is why Congress limited this practice in 2010.

Congress banned self -referral to physician-owned hospitals because there was well documented evidence of the problems that arise in this scenario, including cherry-picking to avoid the uninsured, those on Medicaid, and medically complex patients. A 2023 study from Dobson Davanzo found that “compared to non-POHs, POHs generally treat a population that is younger, less complex or comorbid, and less likely to be dually eligible or non-white, and that POHs have higher margins and lower unreimbursed and uncompensated care costs as a percent of net patient revenue compared to non-POHs.”

Further, in part because of this behavior, the existence of a new physician-owned hospital – which often differs from a full-service hospital in that it offers limited services, often specializes in specific procedures, and doesn’t offer emergency department access – can weaken nearby hospitals. The POH diverts profitable service lines and commercially insured patients away from full-service hospitals (2025 Dobson|Davanzo). This dynamic is particularly harmful in rural communities, where the loss of commercially insured patients can threaten the financial viability of sole community hospitals and jeopardize an entire communities’ access to care.

The current law represents a compromise that protects established physician ownership arrangements, promotes financial and patient safety transparency and permits expansion of certain physician-owned hospitals based on demonstrated community need. Efforts to repeal or weaken the current law would not only take our health care system in the wrong direction on health care spending, patient safety and conflict of interest, but undermine the full-service community hospitals that are the bedrock of health care across America.