Physician-owned hospitals persist despite the 2010 moratorium on inpatient growth for most facilities.
In 2021, CMS removed the cap on the number of operating rooms, procedure rooms and beds that can be approved for physician-owned hospitals at the main campus. Brown Gibbons Lang & Co., an independent investment bank and financial advisory firm, is bullish on the future growth of physician-owned hospitals.
The firm released a July 26 report on the state of the physician-owned hospital industry, including an expert roundtable discussion on future merger and acquisition activity.
"I think [physician-owned hospitals] continue to remain a very fiable investment for a lot of different types of potential partners," said Amber McGraw Walsh, a partner at Chicago-based law firm McGuireWoods. "The partnerships are most typically about the opportunities they can unlock in terms of value-based care, operational efficiency, etc."
Eight takeaways from the report:
1. There are around 120 to 130 surgical hospitals in the U.S. with physician owners. More than half of the physician-owned hospitals are independent, and the rest have corporate or health system partners.
2. The breakdown of physician-owned hospitals by ownership structure:
- Independent: 58 percent
- For-profit partner: 38 percent
- Three-way joint venture: 15 percent
- Nonprofit partner: 9 percent
3. Bringing on a health system or corporate partner, such as Surgery Partners, United Surgical Partners International or Surgical Care Affiliates, can provide retiring physicians with high-value liquidity while also giving early-career physicians the opportunity to buy in or increase ownership.
4. Physician-owned hospitals can expand by adding ASCs and urgent care centers. Surgery centers are typically more successful for physician-owned hospitals and can be investment vehicles for early career physicians in the market, according to the report.
5. Only physician-owned hospitals in markets with high concentration of Medicaid beneficiaries are able to expand the inpatient hospitals.
6. Outpatient surgery generates around 42 percent of physician-owned hospital revenue. Nonphysician-owned hospitals typically generate 28 percent of their revenue from outpatient surgery.
7. Brown Gibbons Lang predicts physician-owned hospitals will be highly competitive facilities in the emerging healthcare landscape focused on value-based care because they have lower price points than nonphysician-owned hospitals and rely less on inpatient surgery revenue.
8. Physician-owned hospitals are in a good position to become vertically integrated networks or partner with payers in the future, according to Brown Gibbons Lang.