The Business of Healthcare

A Good Reason and the Real Reason for Restricting Physician Owned Hospitals

November 3, 2014

To paraphrase J.P. Morgan, we always have two reasons for doing anything: a good reason and the real reason.

The claimed good reason to restrict further physician owned Medicare certified hospitals, and the expansion of existing certified physician owned hospitals, is to prevent over utilization due to profit making motives.

But traditional hospitals are induced by the same law, Obamacare, to build physician networks to refer patients inside the network and to the hospital, all for the owner’s, that is, the hospital’s, profit.

The good reason to restrict physician owned hospitals leads to the nonsensical: Physicians profiting from physician referrals is bad. Traditional hospitals profiting from their controlled physicians’ referrals is good.

So what’s the real reason?

The real reason is that traditional hospitals are fervent participants in their trade organizations. As a result, they have much better trade organizations. Those trade organizations have much better lobbyists.

It’s not that physicians, as a group, are victims; it’s just that they, as an organized body (or rather, as a far less organized body), gave up the fight long ago.

As in the case with almost everything, the road block preventing Medicare certified physician owned hospitals has a silver lining. Just as with physician owned surgery centers that don’t accept Medicare patients, surgical hospitals can thrive while shunning Medicare and other government reimbursed cases.

But absent the willingness to organize to protect and expand that business, you can expect that hospitals will be lobbying to close that “loophole,” too.

It will be like Walmart lobbying against the unfairness of mini-marts.

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