Reconsidering the Affordable Care Act’s Restrictions on Physician-Owned Hospitals: Analysis of CMS Data on Total Hip and Knee Arthroplasty

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Abstract

Background:

Concerns about financial incentives and increased costs prompted legislation limiting the expansion of physician-owned hospitals in 2010. Supporters of physician-owned hospitals argue that they improve the value of care by improving quality and reducing costs. The purpose of the present study was to determine whether physician-owned and non-physician-owned hospitals differ in terms of costs, outcomes, and patient satisfaction in the setting of total hip arthroplasty (THA) and total knee arthroplasty (TKA).

Methods:

With use of the U.S. Centers for Medicare & Medicaid Services (CMS) Inpatient Charge Data, we identified 45 physician-owned and 2,657 non-physician-owned hospitals that performed ≥11 primary TKA and THA procedures in 2014. Cost data, patient-satisfaction scores, and risk-adjusted complication and 30-day readmission scores for knee and hip arthroplasty patients were obtained from the multiyear CMS Hospital Compare database.

Results:

Physician-owned hospitals received lower mean Medicare payments than did non-physician-owned hospitals for THA and TKA procedures ($11,106 compared with $12,699; p = 0.002). While the 30-day readmission score did not differ significantly between the 2 types of hospitals (4.48 compared with 4.62 for physician-owned and non-physician-owned, respectively; p = 0.104), physician-owned hospitals had a lower risk-adjusted complication score (2.83 compared with 3.04; p = 0.015). Physician-owned hospitals outperformed non-physician-owned hospitals in all patient-satisfaction categories, including mean linear scores for recommending the hospital (93.9 compared with 87.9; p < 0.001) and overall hospital rating (93.4 compared with 88.4; p < 0.001). When controlling for hospital demographic variables, status as a non-physician-owned hospital was an independent risk factor for being in the upper quartile of all inpatient payments for Medicare Severity-Diagnosis Related Group (MS-DRG) 470 (odds ratio, 3.317; 95% confidence interval, 1.174 to 9.371; p = 0.024), which may be because of a difference in CMS payment methodology.

Conclusions:

Our findings suggest that physician-owned hospitals are associated with lower mean Medicare costs, fewer complications, and higher patient satisfaction following THA and TKA than non-physician-owned hospitals. Policymakers should consider these data when debating the current moratorium on physician-owned hospital expansion.

Level of Evidence:

Therapeutic Level III. See Instructions for Authors for a complete description of levels of evidence.

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