The AMA supports bipartisan federal legislation that would create exemptions to current restrictions on physician ownership of hospitals and allow these facilities to open in communities that face the greatest demand for additional hospital services.
The Physician-Led and Rural Access to Quality Care Act, H.R. 2191, would permit physicians to own rural hospitals as long as the facility is more than a 35-mile drive from a main patient campus or critical-access hospital. It would also lift the severe limits on expansion of existing physician-owned hospitals so that they can grow to meet the needs of their patients and communities.
“Rural hospitals provide essential health care services to millions of Americans, but they continue to face immense financial pressures and workforce shortages that threaten their viability,” James L. Madara, MD, the AMA’s executive vice president and CEO, wrote in a letter (PDF) to the bill’s sponsor Rep. Morgan Griffith (R-Va.), and its original co-sponsors Reps. Kevin Hern (R-Okla.), Vicente Gonzalez (D-Texas) and Lou Correa (D-Calif.).
“Rural communities deserve every tool possible to save hospitals that are on the cusp of closure,” Dr. Madara added, noting that more than 130 rural hospitals have closed since 2010.
Physician-owned hospitals grew rapidly from less than 70 nationwide in the early 2000s to roughly 250 by 2010. That growth was spurred by demand for general acute care hospitals in some markets and opportunities to boost clinical operations and surgical procedures through facility specialization.
This stopped in 2010 with the passage of the Affordable Care Act (ACA), which—after lobbying by hospital trade groups—included provisions that effectively banned the expansion of existing physician-owned hospitals and blocked new ones from opening.
“Unfortunately, current law prevents physicians from owning hospitals, which limits one of the most logical classes of potential owners from saving a rural hospital,” Dr. Madara’s letter says. “This targeted, partial removal of the physician ownership ban would give underserved rural areas a potential tool to provide hospital services.”
The legislation, which now has 22 cosponsors, also stipulates more lenient criteria for physician ownership of hospitals in extremely remote localities, specifically within a 15-mile drive of a critical-access hospital in the case of mountainous terrain or areas that only have secondary roads.
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“This legislation capitalizes on the fact that physician-led hospitals have been shown to provide high-quality care at lower costs compared to other hospitals,” Dr. Madara’s letter says. “Studies have found that hospitals owned by physicians deliver savings to Medicare, feature lower prices for procedures and are more efficient.”
Sen. James Lankford (R-Okla.) introduced a companion bill, S. 1390. Six additional GOP senators joined as original co-sponsors.
“This legislation has the power to preserve and expand access to critical health care services in the communities that need them most,” AMA President Bruce A. Scott, MD, said in a Lankford news release.
“Physician-led hospitals are known to deliver high-quality, cost-effective care,” Dr. Scott added. “This is a commonsense solution to a worsening problem. The AMA strongly supports this legislation and urges Congress to pass it as a vital step toward improving health care access for rural patients.”
More competition needed
The AMA led a coalition of 85 state and national medical societies (PDF) in support of similar legislation last year.
AMA policy supports the repealing the ban on physician-owned hospitals as one way to promote competition and choice. The AMA also advocates removing restrictions on physicians’ owning, constructing or expanding any hospital facility.
AMA Immediate Past President Jessie M. Ehrenfeld, MD, MPH, has written extensively on the positive impact of physician-owned hospitals—particularly as a means to combat the negative effects of growing consolidation in health care.
“The trend toward sharply higher levels of hospital market concentration around the nation has not benefited patients, who experience higher costs and poorer health outcomes in highly concentrated markets,” Dr. Ehrenfeld wrote in a 2023 AMA Leadership Viewpoint column.
“Fostering greater competition by dismantling barriers to physician ownership of hospitals will provide patients with another option to receive high-quality care through integrated, coordinated care delivery,” he added.
Dr. Ehrenfeld and his co-authors argued this point forcefully and extensively in their article, “Reconsidering the Ban on Physician-Owned Hospitals to Combat Consolidation,” that was published in the New York University Journal of Legislation and Public Policy.
“The physician-owned hospital ban is an important, largely overlooked obstacle to increased competition in health care markets,” the article says.
“Because hospital market power can be exercised both upstream against physicians and downstream against insurers and patients, physicians have unique incentives to defeat this market power,” Dr. Ehrenfeld and his colleagues wrote. “By becoming hospital owners, they are given the incentive and ability to do so.”
