Physician-Owned Specialty Hospitals: A Market Signal For Medicare Payment Revisions

Abstract

Jean Mitchell's findings show that physician-entrepreneurs respond to financial incentives and take advantage of variations in profitability within Medicare's hospital payment system. The growth of physician-owned specialty hospitals can be seen as the reflection of parallel growth in profit opportunities. As Medicare plans to do, payments should be revised to squeeze out excess profits. Prohibiting physicians' use of hospitals they own might be unnecessary and could make it harder to identify future distortions in Medicare prices. If squeezing out excess profits threatens general hospitals' social missions, then new and explicit ways of identifying and funding social missions must be found.