Beware of doctor-owned hospital
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There’s been a lot of news recently about new health-care facilities in Northeast Ohio. But one trend is particularly disturbing and should be of concern to Summit County residents. That trend is physician investment and ownership in hospitals.
Most recently, we have heard about a proposal to build a new, physician-owned for-profit hospital in northern Summit County.
Why should residents be concerned? Simply stated, physician-owned for-profit hospitals pose a threat to our local community-owned nonprofit hospitals that have long served the health-care needs of all patients, regardless of their ability to pay.
Nonprofit community hospitals like Akron General and Akron City Hospital have always faced a challenging mandate. They provide for the health and welfare of local patients including the uninsured and indigent, and they do so with little to no external subsidies.
Even when patients have insurance or are covered by Medicare or Medicaid, reimbursements typically don’t match the cost of providing services — especially when patients are admitted for treatment.
Nonprofit hospitals also provide community education and screenings. And because Akron General and Akron City Hospital are teaching hospitals, they play a vital role in preparing the health-care providers of tomorrow.
Paradoxically, in order to stay in business and fulfill their mission, nonprofit hospitals must make money just like any other business. The target for operating margins for most hospitals is about 2 percent to 4 percent — which means that, even in the best years, there is not much excess. Any revenue in a nonprofit budget is invested back in the hospital to continuously improve patient care.
So how does physician ownership pose a threat?
In a typical nonprofit setting, physicians use the hospital’s resources to admit and care for patients. Everyone works toward the same goal — the betterment of the patient. No one individual within that system benefits or loses if patients consume more or fewer resources within the health system.
As a result, patients can be confident that they will be provided with the best and most appropriate care regardless of their insurance coverage or ability to pay. Patient care, rather than profit, becomes the principal driver of all decisions.
This fragile relationship among patient, hospital and practitioner is threatened when physicians can profit directly from the patient’s hospital stay. The American Hospital Association has found that, when physicians have a stake in a hospital, the needs of the patient are in conflict with the financial interests of the physician.
This is because physicians not only receive professional fees for providing patient services, but they also share in the earnings of the facility. While the vast majority of physicians are ethical in their referrals, studies have repeatedly demonstrated that utilization increases in physician-owned hospitals.
The greater utilization translates into higher health-care costs for patients, businesses and, ultimately, communities.
Granted, physician investment in hospitals was needed to build facilities in underserved areas in the country where new facilities would otherwise not have been feasible. But Summit County is not such an area. Most of the seven adult hospitals in Summit and nearby counties are not anywhere close to operating at capacity.
With so many empty hospital beds already in place, the question is obvious: Do we really need another hospital in Summit County?
The data make a strong case that another hospital is not needed.
There’s no question that times are challenging for local physicians. Reimbursement rates are lower, and malpractice insurance rates are higher than in most areas of the United States. Physicians also face significant regional competition for patients and challenges recruiting and retaining doctors to their practices.
Meanwhile, we have highly trained and outstanding physicians practicing in our local hospitals. National rankings repeatedly demonstrate that local physicians provide a level of care and service comparable to any major metropolitan area in this country.
This is due at least in part to the trust that patients have placed in the local medical community to do what is in the best interest without regard to their own financial interests.
That trust becomes particularly important when patients are sick and vulnerable and rely on the compassion, skill and direction of their physician. We believe that patients should choose their hospital based upon quality and services, and that they should not be directed to a facility based upon the personal financial interest of their physician.
When physicians become hospital owners themselves, they place themselves in direct competition with nonprofit hospitals. Aside from steering patients to their own hospitals, there is also a tendency, supported by numerous studies, to see fewer Medicaid and uninsured patients. These patients are referred instead to the nonprofit community hospitals.
Our nonprofit hospitals are already in a tenuous financial position. It could be disastrous if patients with insurance are steered to for-profit hospitals while nonprofits continue to treat an increasing number of uninsured patients. For this reason, the American Hospital Association is unequivocally opposed to physician ownership in hospitals.
We need to start asking difficult questions now before our safety net is in peril. Do we actually need another hospital in Summit County? Does physician ownership make sense for patients and the community, given the numerous conflicts of interest that can arise? Could the allocated dollars be used more wisely to actually improve care for the residents of our area?
Northeast Ohio is transforming itself, led in part by a strong and vibrant group of health-care institutions that provide exceptional care to patients. Rather than building physician-owned hospitals as for-profit businesses, we should focus on diminishing the cost of care while simultaneously improving the quality of care for everyone in Summit County.
