Down on the Farm The Attack on Physician Ownership

Certificate of Need

As the federal specialty hospital moratorium has ended (at least for now), many states are now moving forward with their own initiatives to prevent market entry of physician owned facilities through state CON regulations. Despite the original purpose of CON being to control costs, in light of continued evidence refuting CON’s ability to reduce healthcare costs, arguments are now being made to support the use of CON as preventing physician self-referral and supporting continued viability of community hospitals’ “charity care” policies, e.g., in the April 2007 issue of Health Affairs, Jean Mitchell, PhD, released findings indicating that physician owners exploit the exceptions in the Stark law to self-refer patients for diagnostic imaging. Additionally in 2007, Kansas pursued efforts to reinstate CON for specialty hospitals while Montana extended CON for specialty hospitals, with both states citing physician self referral concerns.

The New Payor Paradigm

Enveloping (and perhaps permeating) all of these challenges to physicians is the developing new paradigm in the method of payment for healthcare services, with an accelerating movement from “defined benefits,” where employers provide a package of defined benefits to their employees to a system of “defined contributions” where employers contribute a set amount and then require employees to decide how much of their health benefit dollars to spend by selecting from a range of benefit plans. This sea-change in the source of revenue represents a fundamental shifting of the financial risk of health coverage from the employer to employees under programs such as consumer directed health plans (CDHPs), under which patients will participate more directly in the purchase decision and payment continuum, and presents yet another layer of complexity and competitive marketplace challenges for physicians.

Keeping Them Down on the Farm

Despite their proven benefits, it is not an exercise in paranoia to view the overall effect of the attacks on physician ownership as being aimed not only at rolling back the calendar to an earlier time, but also an attempt to severely diminish the overall role and status of physicians in the delivery of care continuum. This profoundly concerning onslaught against the professional stature and economic interests of physicians arises not only from hospital and insurance industry advocacy campaigns, but even from widely cited purported supporters of physician independence, such as Harvard professor (and former New England Journal of Medicine editor), Arnold S. Relman, MD, who has now redefined what he means as “independence” to include eliminating physician ownership and advocating a U.S. healthcare system where, “...most physicians would be salaried employees of not-for-profit prepaid group practices...”

From the perspective of many, the inevitable outcome of these efforts at placing additional restrictions on physician independence will be to these professionals and their practice of medicine, to the status of, at best, the healthcare equivalent of sharecropping, and, at worst (per Relman), the status of hired help. This begs the question as to whether physicians and their patients, who have benefited from independent physician ownership of ASTC enterprises, will now acquiesce to being “kept down on the farm” or whether they either can or will resist the forces arrayed against them.