Finally, Medicare Advantage (MA) — purportedly a form of VBC — has proven to be mostly an advantage for payors who manipulate risk-adjusted payments to reap significant profits. MA plans have been accused of their own form of cherry-picking and lemon-dropping by reverting patients who become too sick and expensive back to traditional Medicare. Up to this point, little has been done to curb these practices (thought the party may be over soon as the government may have finally caught on). The point here is that, of all the areas of fraud, abuse, and perverse incentives in healthcare, the government has chosen to take strong action against POHs while largely permitting other examples. Entirely banning physician ownership of hospitals over access and self-referral concerns doesn’t square with existing arrangements the government seems more than willing to accept or regulate. Again, two wrongs don’t make a right — but are POHs anywhere near as wrong as the above examples?
The debate over POHs satisfies Schwartz’s Law of the Medical Literature: for each study showing one outcome, there is an equal showing the opposite outcome. There is good evidence that POHs reduce the cost of care while delivering excellent outcomes and high satisfaction. There is also evidence that POHs increase the cost of care and concerns of overutilization are justified. Like many things in healthcare, your point of view and the evidence you choose to believe is heavily influenced by which site of the debate you stand on (and what you stand to lose or gain). Not surprisingly, the American Hospital Association is very much against the idea of repealing the POH ban for many of the reasons discussed above. (One wonders if they would be against repealing not-for-profit status for hospitals who fail to meet their charitable obligations). Equally non-shocking, the Physician Hospitals of America (PHA) group touts results from the 2015 CMS Value-Based Purchasing program showing that 7 out of 10 hospitals receiving bonus payments were POHs (h/t once again to Blake/Hospitalogy).
“Schwartz’s Law: For every healthcare study showing one outcome, there is an equal study showing the opposite outcome.”
If it wasn’t already obvious, I’m pro-POH. (Of course, I’m squarely on the physician side of the debate). The healthcare environment is different than it was 13 years ago when the ACA ban was put into place. Healthcare costs have continued to rise, and consolidation has further warped market dynamics for the worse. Many are looking to VBC, hospital-at-home, prevention/wellness, digital health, Big Retail/Big Tech, RPM/RTM, and ASCs as the future of medicine. In short, one can envision a future where care shifts away from traditional general hospitals and large health systems (though that isn’t stopping them from pouring money into expensive expansions). To be sure, such full-service facilities will always be needed for treatment of complex patients who require multi-disciplinary treatment and the highest level of acute care. However, turning the healthcare cruise ship around is likely going to require keeping as many patients out of that setting as possible. As hinted at previously, a repeal of the POH ban may not even be necessary if the outpatient migration continues. I’m curious about expanding the microhospital concept to small, specialized centers that excel at doing one or a few things really well rather than trying to be an expensive jack-of-all-trades. Better yet, allowing health systems and physicians to compete on the microhospital level allows market forces to take affect — ostensibly driving down costs and improving outcomes.
Whichever side of the debate you fall on, it’s hard to ignore healthcare’s rapidly developing competition problem. As is usually the case, silos, protectionism, and self-interest rule the day with patients caught in the middle. There’s always the possibility repealing the POH ban would worsen the situation. But a lot has changed since 2010, and the time has come to give POHs another shot.
Quick Takes on Repealing the POH Ban / Conclusion
Given the current state of healthcare costs and quality, one would think every and all options should be on the table. Repealing the POH ban could be a failed experiment in realizing healthcare value or could be the catalyst that helps make VBC a more viable concept. Some other considerations:
POHs could help reverse the exodus of healthcare workers and reduce burnout by restoring physician autonomy and offsetting downward pressure on professional fee reimbursement. Physicians are gradually losing their seat at the table. One solution: build your own table.
Beyond the concept of a physician-owned hospital, maybe we should consider a “Clinician-Owned Hospital (COH).” Nothing galvanizes or gives purpose more than a sense of ownership and personal responsibility. If physicians can have ownership, why not nurses, physical therapists, pharmacists, and other allied healthcare professionals?
As the previously discussed examples show, no financial incentive structure or reimbursement model is un-exploitable. While VBC holds a lot of promise and is championed by many, one of its biggest criticisms is that it encourages cherry-picking and lemon-dropping — just like POHs. There are a lot of parallels between POHs and VBC: committing to quality while being mindful of costs, making sure interests are aligned, and making sure those doing the work are rewarded for it.
The “lawyers can own the law firm” argument in favor of POHs is slightly off. Physicians can own their own practices (although fewer and fewer are choosing to do so). Opponents would argue that POHs would be like lawyers owning the courts. But that comparison isn’t right either. Let’s just agree that such a comparison isn’t necessary to argue for or against POHs.
Many POHs do not provide emergency services, something the AHA uses to argue against repealing the ban on the grounds that this is a form of cherry-picking. Interestingly, a bigger threat may be free-standing, independent ERs built in high-income areas. No stranger to this tactic, some health systems target areas with high concentrations of commercially insured patients for outpatient centers.
What happens if/when Big Retail (or Big Tech — some have suggested Apple or Google should buy a hospital to better understand healthcare) decides to buy or build their own hospitals? Is that better or worse than POHs? One would imagine the AHA fighting just as hard against Amazon Basics Medical Center or Our Lady of Walmart Health.
Commentary from Hospitalogy Subscribers
Comment 1:
Coming from a country (Spain) where many private hospitals were founded by physicians, the debate seems odd. It must be one of this very American things (my European self thinks). Jokes aside, American politics are very good at turning strategic discussions into doomsday scenario confrontations - I think POHs are not bad, and most likely not as bad as AHA wants to make it look like.
There's one aspect I'm not in agreement with: to me healthcare should be patient led, not physician led. Asymmetry in clinical information is a historical trend, but hopefully one that will change soon.
Following your baker/physician analogy, I can also bake my own bread - I normally decide not to because it's a hassle, or I have 0 baking skills, or no ingredients. But I can. In healthcare almost anything I want to do is through physicians, sometimes now through mid levels. I'm not talking about surgeries - most definitely I'm not putting a blade to my body - but many areas of medicine are still physician dominated and could benefit from patient ownership. Genetics is one such example - quoting from AMA and inspired by Dr Topol's book "
Since regulation of genetic tests is integral to physician practice and patient care, the AMA advocates to preserve the physician’s role in all aspects of patient care including the oversight of laboratory developed tests (LDTs)". I'm not advocating for everyone to have to manage his or her own health, but definitely more ownership of my health data (crazy I have to ask for my results to somebody else), right to get a lab test without a physician prescription (I can do it in Europe btw) or access to certain drugs without prescription (statins?).
I fear many things in the fascinating world of healthcare, from PBMs - the Palpatine of Pharma - to AMA - the Dark Society of Alchemy and Necromancy, but what I fear the most in healthcare is paralysis. Change is not that terrible, so let's open the door to POHs and see what happens. And let patients own more of their health.
Comment 2:
One other piece that could be interesting re: the hospital-ownership is that health plans are getting better at developing their patient steerage tools to high-value facilities. I think this transparency (reduction of information asymmetry) furthers the case you make.
Comment 3:
In a nutshell, none of the current evidence expressing concern about POHs can withstand the scrutiny of today’s AHA-driven cost model – one that opposes repealing noncompetes, sued over price transparency, and drives an unstainable administrative overhead.
