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Physician Owned Hospitals: Specialization Breeds Efficiency, Regulation Stifles Innovation

Physician owned hospitals (POHs) are an innovative solution to inefficient, clunky, expensive hospitals that plague the health care system today. The idea behind POHs is essentially the specialization argument: why not have people familiar with an industry manage the details of that industry? POHs are known for their top-notch quality and patient satisfaction, and they are financially more efficient than their public or community counterparts.

With these obvious advantages over other hospitals, it is curious that ACA has severely restricted POHs. To be specific, the ACA has prevented the formation of any new physician owned hospitals and the expansion of existing ones.

This is a move consistent with the innovation-stifling direction the administration is moving in regards to healthcare. The medical device tax similarly chokes out innovators and cuts jobs in the health care market. The tax has led to a 65% decrease in investments in health technology firms, evidence of halted innovation in the field.

The argument against POHs is based on the fear that physicians will seek unnecessary procedures and tests to boost revenue and that they will cherry pick only the most healthy patients to treat. However, many POHs report nearly all patients are unaffiliated with hospital ownership. The added competition POHs provide stimulate better quality in state owned hospitals. It appears that the current administration does not view that competition as the true market stimulant that it is. Also, the American Hospital Association and the Federation of American Hospitals (representing non-physician owned hospitals) spent a combined $22 million on lobbying in 2009, essentially buying their way out of competition.

Not only should POH creation and expansion be permitted, it should be encouraged. Competition and innovation should be legislatively viewed as spurs to get the American economy rolling. Anti-profit views should be abandoned and replaced by the notion that profit builds the economy and creates jobs. Physician owned hospitals represent the larger issue of innovation stifling that plagues the current administration.

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