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Investment Opportunities in Physician-Owned Hospitals

Posted by Health Entrepreneur 02/05/2016

 

Value-based care is a one-stop solution to limit the expenses and add to the quality of healthcare. With the strict imposition of law, it is highly impossible to get physician investment before starting a new physician-owned hospital but the task is simplified for already existing hospitals. While the physician-owned hospitals without Medicare certification can go with other options of merging with healthcare organizations as it has an adverse impact on pricing of the other set of for-profit hospitals.

For an overview of Hospital Trends from an Investor's Perspective, CLICK HERE

The Affordable Care Act and POH

Value-based care is a one-stop solution to limit the expenses and add to the quality of healthcare.                                   

                                

 

The trend of physicians being a part of hospital management progressed until the implementation of Affordable Care Act. Section 6001 of the Affordable Care Act of 2010 amended section 1877 of the Social Security Act has imposed additional requirements for physician-owned hospitals to qualify among the other hospitals. However, exceptions are given to rural providers. This Act imposed severe restrictions on the already existing hospitals from expanding and also from starting up new ones.

What would happen to physician-owned hospitals?

With the strict imposition of law, it is highly impossible to get physician investment before starting a new physician-owned hospital. However, the task is simplified for already existing hospitals. The inherent quality to deliver cost-effective high-quality services contributed to patient satisfaction, positioning them strong in the race.

While the physician-owned hospitals without Medicare certification can go with other options of merging with healthcare organizations, it has an adverse impact on pricing of the other set of for-profit hospitals.

Healthy competition among peers would enhance the quality of care provided at minimal prices. The merging or termination of physician-owned hospitals eliminated competition for the community and other for-profit hospitals to dispense high-quality care at minimum prices on par with physician-owned hospitals.

 

The possible modifications in the ownership template can be considered to meet the requirements of a “whole hospital” mentioned in Starks Law.

  1. Merge with a hospital but maintaining ownership of a physician.

  2. Merge with a hospital or organization but sell the ownership of a physician.

  3. Completely dissolve the hospital from a business.

                                          Figure 5: Changing pattern of physician ownership

                            

 The physician-owned hospitals came up with other options to continue in practice.

  • Public equity market share is merging the hospital into a corporation whose shares can be sold in share market. In other words, converting the physician shares to public shares.

  • Affiliate with physicians by employment without a direct equity.

  • Real estate or equipment leasing service is an indirect ownership arrangement

 

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