Congress Should End Obamacare’s Ban on Physician-Owned Hospitals

Hospital spending is the biggest cost driver in American health care, and Washington keeps protecting the same hospital systems that drive costs higher. Patients need more competition, not more consolidation, facility fees, and payment rules that steer care into expensive hospital settings.

New Congressional Budget Office projections show the problem clearly. From 2023 through 2034, fee-for-service Medicare hospital inpatient spending is projected to rise from $145 billion to $217 billion, an increase of 50 percent. Hospital outpatient spending is projected to rise from $65 billion to $161 billion, an increase of 148 percent. Physician services are projected to rise from $71 billion to $87 billion, an increase of 23 percent. CBO’s forecast shows hospital outpatient spending growing roughly six times faster than physician fees over that period.

Hospital Spending Keeps Driving Costs Higher

The cost problem in health care cannot be solved without confronting hospital spending. Hospital inpatient care remains a massive Medicare expense, while hospital outpatient spending is growing far faster than physician services.

That trend should concern every taxpayer and patient. When more care moves into hospital outpatient settings, it often brings higher facility fees and bigger bills even when the underlying service is similar. The payment system rewards large hospital systems, and patients face the cost through higher premiums, higher taxes, and higher out-of-pocket bills.

This is not a case for paying doctors less. The CBO forecast shows physician fees growing far more slowly than hospital spending. The real issue is that Washington has allowed hospital systems to build and protect expensive business models while limiting competitors that could deliver care at lower cost.

Obamacare Protected Hospitals From Competition

One of the clearest examples is Obamacare’s ban on physician-owned hospitals. The Affordable Care Act restricted the ability of new physician-owned hospitals to participate in Medicare and placed tight limits on the expansion of existing physician-owned hospitals.

That policy did not make health care more affordable. It protected incumbent hospital systems from a form of competition that patients need.

Physician-owned hospitals give doctors a direct stake in running efficient, high-quality facilities. They can specialize, focus on patient experience, and compete against large hospital networks that too often use market power to raise prices. Instead of encouraging those alternatives, federal law has kept them boxed in for more than a decade.

Paragon Makes the Case for Reform

Paragon Institute’s Katherine Hall argues that Congress should lift the restrictions on physician-owned hospitals and allow affordable hospitals to compete. Her analysis points to the basic policy problem: Washington has restricted physician-led competitors while hospital spending continues to climb.

That is the wrong direction for health care policy. If Congress wants lower health care costs, it should not protect large hospital networks from competitors that can offer patients more choices. It should remove federal barriers that limit supply, block competition, and keep care locked inside expensive hospital systems.

This reform is especially important because hospital consolidation has already left many patients with fewer options. When large hospital systems buy up practices and dominate local markets, they gain more leverage over patients, employers, insurers, and taxpayers. Physician-owned hospitals offer a practical alternative that can put pressure on costs and improve access.

Congress Should Overturn the Ban

Congress should overturn Obamacare’s ban on physician-owned hospitals. That would not force patients into any particular setting or guarantee success for any particular provider. It would simply allow more hospitals to compete, more doctors to build patient-focused facilities, and more patients to choose lower-cost options.

Health care reform should not start from the assumption that large hospital systems deserve protection. It should start from the patient’s need for affordable care and the taxpayer’s need for discipline in federal health spending.

The CBO numbers show where the pressure is building. Hospital inpatient spending is already enormous, and hospital outpatient spending is projected to grow at a pace that should alarm anyone concerned about Medicare’s future. Congress should respond by expanding competition rather than protecting the incumbent systems that benefit from the status quo.

CFE Takeaway

Hospital spending is growing too fast, and physician-owned hospitals offer a market-based way to inject competition into a system dominated by large hospital networks. Congress should overturn Obamacare’s ban, let physician-owned hospitals compete, and give patients more affordable choices in care.