Access, quality, and costs of care at physician owned hospitals in the United States: observational study

Comparison with other studies

Our study, which includes 219 POHs, is one of the largest and most comprehensive examinations of such hospitals to date. The next largest analysis, performed by the Office of the Inspector General in 2008, included 109 specialty POHs but was narrowly focused on the ability of these hospitals to respond to medical emergencies.25 We found some evidence that patients at POHs may be somewhat healthier than those at non-POHs,26 although the differences were small, and patients at POHs and non-POHs had equivalent numbers of chronic comorbidities and similar predicted mortality rates for common conditions. One potential explanation for these seemingly discrepant results is that differences in age, emergency department admissions, and discharge destination were not of a large enough magnitude to produce clinically significant differences in measures of illness severity. Alternatively, it is possible that claims data may not fully capture meaningful differences in illness acuity between patients at POHs and those at non-POHs.27 Differences in comorbidity coding practices between POHs and non-POHs, for instance, could also have influenced these comparisons.

It is unclear if the modestly higher rate of POH admissions that were initiated by referrals from outpatient clinics is evidence of inappropriate utilization. Certainly, most cases of pneumonia and acute myocardial infarction in Medicare patients warrant admission to hospital. None the less, our results suggest that any self referrals that did occur were modest and did not result in substantial differences in outcomes for patients at POHs and non-POHs, or their proportions of patients from ethnic and racial minority groups and those using Medicaid. Indeed, we found that patients at POHs and non-POHs were equally likely to have Medicaid insurance and to be from racial or ethnic minority groups. These findings depart substantially from most previous research, which has generally shown that specialty hospitals, including specialty POHs, preferentially select patients with more profitable insurance plans and have lower proportions of patients with Medicaid than surrounding hospitals.7 28 29 30 This difference between our study and previous work may stem from our inclusion of all POHs, rather than specialty POHs, the focus of almost all previous studies of POHs. In this context we found meaningful differences in the patients served by general POHs versus specialty POHs, which may not be surprising since specialty hospitals in general (including specialty POHs) tend to care for healthier, and generally wealthier, patients. It may be that general POHs, as with other general hospitals, are not able to selectively treat less disadvantaged patients and still maintain adequate patient volumes. These findings underscore that the policy intervention, which targets all POHs, may have been too broadly cast.

Consistent with previous work, we found that POHs and non-POHs have similar mortality rates for common medical conditions.5 7 29 The results of our cost comparisons are also consistent with previous research, which has generally found that POHs have costs of care that are equivalent to, and occasionally higher than, costs at non-POHs.5 7 31 POHs did have significantly shorter lengths of stay than non-POHs though, raising the possibility that some POHs may be more focused on discharging patients early than non-POHs. We did not find that these shorter lengths of stay were associated with more readmissions or worse clinical outcomes. In the aggregate, given that POHs and non-POHs appear to receive similar reimbursements from the Centers for Medicare and Medicaid Services for common conditions, it seems unlikely that these institutions are engaging in excessive billing or upcoding. Furthermore, previous research examining the impact of POHs on the financial viability of surrounding hospitals has largely failed to substantiate concerns that POHs affect inpatient volume, revenues, or profits at competing hospitals.3 32 33 Based on our finding that POHs comprise, on average, just 6.3% of Medicare admissions in any given market, it seems less likely that POHs are having a meaningful impact on the financial viability of non-POHs.

What accounts for the differences between our findings and those of previous studies, and particularly the analyses by the Medicare Payment Advisory Commission (MedPAC)? One potential explanation is that the populations of specialty POHs included in previous studies are not representative of POHs more broadly. For example, the studies by MedPAC—which remain the two largest ones of case mix, quality of care, and costs of care at POHs conducted to date—primarily focused on cardiac, orthopedic, and surgical specialty hospitals, most of which were small institutions. Indeed, in MedPAC’s study on orthopedic and surgical POHs there was a median 14 inpatient beds.7 28 In contrast, in our study, which included many more POHs, nearly 60% of POHs had more than 100 beds. Furthermore, the MedPAC studied specialty hospitals owned by physicians, whereas we analyzed all POHs, including both specialty and general POHs. Fundamentally then our analysis and those performed by MEDPAC included different sets of hospitals. Whether these differences reflect the influence of public policies designed to reduce cherry picking, the opening of new and larger POHs since the MedPAC studies were conducted, systematic differences between specialty and general POHs, or other factors is unclear.

Conclusions and policy implications

Our study has several important policy implications. Firstly, our work suggests that some of the major criticisms of POHs, including that they select more profitable patients, provide lower value care, and threaten the financial viability of surrounding hospitals, may no longer be valid. To be clear, by a few measures, patients at POHs do seem to be somewhat healthier than those at non-POHs, which certainly lends credence to concerns that POHs might select less critically ill patients. However, POHs were nearly identical to non-POHs in almost every other metric that we examined, including their proportions of Medicaid patients and those from ethnic and racial minority groups. Furthermore, in certain circumstances it may even be appropriate for POHs to care for healthier patients because many of these hospitals are smaller and have fewer of the advanced capabilities and subspecialty expertise necessary to care for complex and critically ill patients. Thus, taken together our findings call into question whether policies that broadly target all POHs are still necessary. Secondly, because we cannot rule out that some POHs may still engage in untoward behaviors, additional research is necessary to identify subgroups of hospitals that do systematically engage in them. Existing policies targeting all POHs could then be revised to focus on these select institutions. Of course an alternative, and possibly better, way to reduce cherry picking is to further reduce payment amounts in ways that reduce financial incentives to selectively care for healthier patients. General POHs, which account for more than 80% of all Medicare admissions to a POH and do not seem to systematically engage in cherry picking, could be exempted from these regulations.

Our findings may also have important implications for understanding patterns of access to care, healthcare quality, and costs of care in other countries where physicians own clinics and hospitals—including India, Brazil, Colombia, and several other countries in South America and other parts of the developing world.34 35 However, our results may not be generalizable to these nations, and additional studies are necessary to determine how physician ownership of hospitals influences clinical outcomes in these regions.

Strengths and limitations of this study

Our study has important limitations. Though we examined sources of patient admission at POHs and other hospitals, we did not directly investigate referral patterns by physician owners of POHs. None the less, that POHs and non-POHs treated similar proportions of patients with Medicaid and those from ethnic and racial minority groups suggests that the owners of POHs did not engage in self referrals of more well off patients with better insurance policies often enough to meaningfully reduce the proportions of minority and disadvantaged patients treated by POHs. Moreover, we did not evaluate long term total costs for episodes of care, which may vary more between POHs and non-POHs than do costs for the episode of care itself. We also did not examine outcomes for major procedures, such as coronary artery bypass grafting or joint replacement surgeries, which are performed routinely at some specialty POHs. Furthermore, our findings may not extend to patients without Medicare or to care for other types of illnesses. However, we have previously found that performance on metrics for acute myocardial infarction, congestive heart failure, and pneumonia broadly predicts care patterns at a hospital.36 In addition, though the percentage of a hospital owned by physicians has been previously associated with cherry picking, we could not evaluate how this variable influenced our outcomes of interest.6 Put another way, it is possible that physician ownership stake is positively correlated with cherry picking patients, although any such correlation is likely to be small given that overall we found no effect. Importantly, however, the purpose of this study was to assess the appropriateness of the broader policy approach that treats physician ownership as a bimodal outcome (that is, a hospital is either physician owned or not physician owned). Thus, from a public policy standpoint, failing to account for percentage of physician ownership should not alter the relevance or validity of our findings. Finally, our results, as with those of all observational studies, are subject to confounding by unmeasured variables. While we tried our best to identify and account for potential confounders, any such effort is inherently imperfect.

Conclusion

Using a comprehensive list of POHs across the United States and contemporary data, we found no evidence that POHs systematically avoid poorer patients or those from ethnic and racial minority groups. POHs also performed equally to non-POHs on a wide array of measures of quality of care, costs, and payments for care. These findings indicate a need to re-examine existing public policies that target all hospitals with physician owners.