RECONSIDERING THE BAN ON PHYSICIAN-OWNED HOSPITALS TO COMBAT CONSOLIDATION

Matthew C. Mandelberg et al., Reconsidering the Ban on Physician-Owned Hospitals to Combat Consolidation, 26 N.Y.U. J. Legis. & Pub. Pol’y 697 (2024).

1 Pages Posted: 11 Feb 2023 Last revised: 5 Jul 2024

See all articles by Matthew Mandelberg

Matthew Mandelberg

U.S. Department of Justice - Antitrust Division

Michael Smith

Georgetown University Law Center; Government of the United States of America - Federal Trade Commission

Jesse Ehrenfeld

Medical College of Wisconsin; American Medical Association; Vanderbilt University; Uniformed Services University of the Health Sciences

Brian Miller

Johns Hopkins University School of Medicine; Johns Hopkins Carey Business School; American Enterprise Institute

Date Written: February 5, 2023

Abstract

Ongoing consolidation by hospitals and providers threatens to further reduce competition in U.S. healthcare markets. Physician-owned hospitals (POHs) served as a rare countertrend for many years—a pathway for innovative and efficient alternatives to enter hospital markets and offer a bulwark against this consolidation. However, that countertrend came to an abrupt and enduring halt in 2010, when hospital incumbents leveraged passage of the Affordable Care Act to obtain an ill-conceived and unrelated ban on POHs. While health services researchers have scrutinized the POH ban, this Article analyzes it through a competition lens. It incorporates the growing attention in antitrust to labor markets and explores how physicians, through POHs, are particularly well-positioned to identify market opportunities. In doing so, physicians can defeat the market power possessed by hospital incumbents, upstream against physicians and downstream against payors and patients. 

This Article first provides an overview of the seemingly inexorable trends towards further consolidation among healthcare providers and the related competition concerns this consolidation raises. Next, the paper discusses the factors that positioned POHs to counterbalance these consolidation trends as market entrants and innovators, and how, after lobbying by incumbent hos- pitals and health systems, POHs faced regulatory pushback culminating in a federal ban on further POH growth and expansion. The Article then describes how market power by hospital incumbents in both upstream and downstream markets accentuates the incentives and importance of physicians in identify- ing opportunities for market entry and innovation. It further discusses how the POH ban affects healthcare competition, identifies the potential benefits of relaxing the ban, and suggests more narrowly tailored policy options that could mitigate policymakers’ concerns about POHs—concerns that may not be unique to physician ownership and do not justify depriving the market of POH competition. The Article concludes with our recommendation that Congress remove the ban on POHs and apply more appropriately tailored policies.

Note:
Funding declaration: The authors received no funding for this work.

Conflict of Interests: There is no competing interest.

Keywords: antitrust law, competition policy, health policy, medicare policy, hospitals, payment policy

JEL Classification: k21, k23, j38, j41, j42, i11, i13, i18, L11, L12, L13, L25, L40, L41, L44

Suggested Citation

Mandelberg, Matthew and Smith, Michael and Ehrenfeld, Jesse and Miller, Brian, RECONSIDERING THE BAN ON PHYSICIAN-OWNED HOSPITALS TO COMBAT CONSOLIDATION (February 5, 2023).

Matthew C. Mandelberg et al., Reconsidering the Ban on Physician-Owned Hospitals to Combat Consolidation, 26 N.Y.U. J. Legis. & Pub. Pol’y 697 (2024).

, Available at SSRN: https://ssrn.com/abstract=4350105 or http://dx.doi.org/10.2139/ssrn.4350105

Matthew Mandelberg

U.S. Department of Justice - Antitrust Division ( email )

DC
United States

Michael Smith

Georgetown University Law Center ( email )

HOME PAGE: http://www.law.georgetown.edu/faculty/michael-h-smith/

Government of the United States of America - Federal Trade Commission

600 Pennsylvania Ave., NW
Washington, DC 20580
United States

Jesse Ehrenfeld

Medical College of Wisconsin ( email )

8701 Watertown Plank Road
Milwaukee, WI WI 53226
United States

American Medical Association ( email )

515 North State St.
Chicago, IL 60610
United States

Vanderbilt University ( email )

2301 Vanderbilt Place
Nashville, TN 37240
United States

Uniformed Services University of the Health Sciences ( email )

Brian Miller (Contact Author)

Johns Hopkins University School of Medicine ( email )

600 N Wolfe Street
Meyer 8-143
Baltimore, MD MD 21287
United States

HOME PAGE: http://www.hopkinsmedicine.org/profiles/details/brian-miller

Johns Hopkins Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

American Enterprise Institute ( email )

1789 Massachusetts Ave, NW
Washington, DC 20036
United States

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