Repealing the Ban on Physician-Owned Hospitals Could Restore Competition in American Healthcare

One of the most consequential healthcare policy mistakes of the last 15 years was the ban on new or expanded physician-owned hospitals. Repealing Section 6001 of the Affordable Care Act will not simply change ownership structures, it will restore competition, strengthen independent practice, expand rural access, and lower costs for patients.

What Section 6001 Did

In 2010, Section 6001 of the Affordable Care Act prohibited new physician-owned hospitals from participating in Medicare and froze expansion of existing ones. Facilities already operating were grandfathered, but growth was capped. The practical effect was to insulate incumbent hospital systems from physician-led competition. Before the ban, physician-owned hospitals were growing in markets where large systems had consolidated and where physicians had little leverage over contracts, governance, or capital investment. Section 6001 halted that growth almost overnight.

The stated goal was to protect patients, but if the goal was to protect patients, the policy should be judged on outcomes.

What the Data Show

White papers and peer reviewed literature have repeatedly examined physician-owned hospitals. Their findings are remarkably consistent. Physician owned hospitals have:

• Lower readmission rates compared to non-physician hospitals
• Lower mortality rates on several measures
• High patient satisfaction scores
• Similar or modestly lower case-mix indices

In other words, physician owned hospitals are treating comparable or sicker patients and obtaining equal or better outcomes.

Cost data are equally important. Physician-owned facilities tend to operate with leaner administrative structures and lower overhead than large consolidated systems. Studies have shown lower average cost per discharge and shorter lengths of stay in physician-owned hospitals.

Competition impacts access and cost. Economic literature consistently shows that hospital consolidation drives higher prices. When markets become highly concentrated, commercial prices rise and often dramatically.

Allowing physician-owned hospitals introduces competition into those markets, which benefits employers and patients through lower negotiated rates, while simultaneously adding choice.

The Rural Access Crisis

Since the ban on physician owned hospitals, more than 140 rural hospitals have closed, and hundreds more are considered financially vulnerable. When a hospital closes, the impact extends far beyond healthcare. Local unemployment rises, businesses hesitate to invest, population declines accelerate, and critical access to emergency and maternal care deteriorates. Large systems often acquire rural facilities that feed referrals into urban centers. When margins tighten, those feeder hospitals are frequently shuttered, yet the physicians practicing in those communities are barred from stepping in to stabilize or reopen facilities through ownership.

Section 6001 effectively blocks local solutions for local problems. If rural access is a bipartisan priority, Congress should allow those community physicians the opportunity to invest in, and operate, hospitals that serve their own families and neighbors.

Answering the Critics

The primary criticism of physician-owned hospitals is that they “cherry pick” healthier or better-insured patients. The studies to date do not support that claim. Differences in patient acuity between physician-owned and non-physician hospitals are modest. Many physician-owned hospitals maintain emergency departments and treat Medicare beneficiaries at rates comparable to surrounding community facilities.

In reality, the logistics of true cherry-picking are also far more complicated than critics suggest. Physicians do not divide their patients by insurance type hour by hour; modern workflows, coverage requirements, and referral networks make that impractical.

The Overutilization Argument is Outdated

The other concerns surround overutilization. While that makes sense in theory, if physician ownership automatically produced overutilization, we would expect to see it clearly in ambulatory surgery centers (ASCs) where physicians are permitted to own 100% of those facilities. Yet the data shows that ASCs consistently deliver care at 30–50% lower cost than hospital outpatient departments for the same procedures, with excellent quality outcomes and high patient satisfaction. There is no widespread evidence that physician ownership of ASCs has driven systemic overutilization. Instead, ASCs have become one of the most effective cost-containment mechanisms in procedural medicine. Why would hospital ownership be fundamentally different?

When the Stark Law was enacted in the late 1980s and early 1990s, modern utilization controls did not exist. There was no widespread prior authorization, no bundled payments, no value-based purchasing, no RAC audits. Today, nearly every major surgical procedure undergoes some form of utilization review. Commercial insurers aggressively manage authorizations. Medicare employs multiple audit and compliance mechanisms. Physicians face peer review, quality reporting, and payment penalties tied to outcomes. The regulatory environment of 2010 is not the regulatory environment of 2026. Ownership alone is no longer a plausible driver of unchecked utilization, given that oversight mechanisms already exist and often excessively so.

Medicare Advantage plans deploy some of the most aggressive utilization management and prior authorization tools in the healthcare system. Meanwhile, in many major markets, dominant health systems have walked away from Medicare Advantage contracts altogether, narrowing patient choice and limiting access. Physician-owned hospitals represent a practical solution. They can restore competition, expand network participation, and ensure that the millions of seniors enrolled in Medicare Advantage have meaningful access to care.

Congress and regulators should permit the expansion and development of physician-owned hospitals in markets where large systems have opted out of Medicare Advantage, so long as those physician-led facilities are willing to contract with these plans and serve their community.

Why This Matters for Independent Practice

Hospital employment has accelerated dramatically over the last decade. As systems acquire practices, referrals often shift to higher-cost hospital settings. Facility fees alone can double or triple the price of routine services without improving outcomes. The result is higher overall healthcare spending and fewer choices for patients. Physician-owned hospitals offer an alternative model where clinicians retain governance authority, align incentives around efficiency, and compete directly on quality and cost. This is not about enriching doctors, but is instead about restoring balance in markets that have become increasingly consolidated and overly expensive.

What We’re Doing Next

Physicians from across the country are engaging members of Congress to revisit Section 6001. Reform does not require dismantling safeguards. It simply requires restoring the ability of physicians to invest in, and operate, hospitals under modern regulatory oversight. If policymakers want to reduce costs, expand rural access, and preserve independent practice, this is one of the most straightforward structural reforms available.

Healthcare does not improve when competition disappears. It improves when patients have options and physicians have autonomy to build high-quality systems of care. Repealing the ban on physician-owned hospitals is not a partisan issue. It is a pro-competition, pro-patient, pro-community reform. Independent physicians remain one of the most stabilizing forces in American medicine. If we want a healthcare system that prioritizes access, quality, and affordability, we should empower physicians, not prohibit them from building effective healthcare systems.