Physician-Owned Hospitals Linked to Shifts in Care

Newswise — After physicians become part-owners of specialty hospitals, referrals for surgery and other hospital tests and treatments increase significantly, suggests a study in the July issue of Medical Care. The journal is published by Lippincott Williams & Wilkins, a part of Wolters Kluwer Health, a leading provider of information and business intelligence for students, professionals, and institutions in medicine, nursing, allied health, pharmacy and the pharmaceutical industry.

“Given the growth in physician-owned hospitals, these findings suggest that health care expenditures will be substantially greater for patients treated at these institutions relative to persons who obtain care from non self-referral hospitals,” writes Jean M. Mitchell, Ph.D., of Georgetown University, Washington, D.C.

Dr. Mitchell analyzed patterns in the care of Oklahoma workers compensation patients treated for back and spine problems from 2001 to 2004. Her focus was on how physicians’ practice patterns changed after they became part-owners of specialty hospitals. Recent years have seen a growing number of physician-owned specialty hospitals, which are limited to providing specialized, relatively profitable services such as spine, orthopedic, or heart surgery.

During the period studied, two new physician-owned specialty hospitals—an orthopedic hospital and a spine hospital—opened in the Tulsa area. Dr. Mitchell compared changes in practice patterns for doctors who did and did not become part-owners of one of these two hospitals.

Referrals for complex spinal surgery jumped 650 percent
The results showed a significant increase in referrals for certain treatments and tests after physicians gained ownership interest. The most dramatic change was a 650 percent increase in patients referred for “complex” spinal fusion surgery: from 0.1 percent before ownership to 6.51 percent after ownership. In contrast, for non-owner physicians, referrals for complex spinal fusion surgery remained stable at less than one percent.

At the same time, physician-owners became less likely to refer patients for less-costly “simple” spinal fusion surgery, compared to an increase in such referrals for non-owners. Physicians who became owners also became more likely to refer patients for ancillary services performed at specialty hospitals, including physical therapy and diagnostic tests such as MRI scans.

Specialty hospitals are generally exempted from federal and state laws banning physicians from referring patients to facilities where they have an investment interest. Proponents of specialty hospitals contend that, by concentrating on a single area, these facilities can lower costs while potentially enhancing quality. However, critics suggest that financial incentives create an inherent conflict of interest for physician owners.

The new results suggest that physicians’ behavior changes after they become owners of specialty hospitals, including a dramatic increase in referrals for complex and costly spinal operations. As the market share of physician-owned specialty hospitals continues to rise, health care costs may be higher for patients treated at these centers than for patients treated by physicians who do not profit from self-referrals, Dr. Mitchell believes. She concludes, “These findings should be of interest to policymakers and third party insurers who are concerned about increased utilization associated with physician self-referral arrangements and its subsequent contribution to escalating health care expenditures for individuals with good insurance coverage.”

About Medical Care
Rated as one of the top ten journals in healthcare administration, Medical Care is devoted to all aspects of the administration and delivery of healthcare. This scholarly journal publishes original, peer-reviewed papers documenting the most current developments in the rapidly changing field of healthcare. Medical Care provides timely reports on the findings of original investigations into issues related to the research, planning, organization, financing, provision, and evaluation of health services. In addition, numerous special supplementary issues that focus on specialized topics are produced with each volume. Medical Care is the official journal of the Medical Care Section of the American Public Health Association. Visit the journal website at

About Lippincott Williams & Wilkins
Lippincott Williams & Wilkins ( is a leading international publisher for healthcare professionals and students with nearly 300 periodicals and 1,500 books in more than 100 disciplines publishing under the LWW brand, as well as content-based sites and online corporate and customer services. LWW is part of Wolters Kluwer Health, a leading provider of information and business intelligence for students, professionals and institutions in medicine, nursing, allied health, pharmacy and the pharmaceutical industry.

Wolters Kluwer Health is a division of Wolters Kluwer, a leading global information services and publishing company with annual revenues (2007) of €3.4 billion ($4.8 billion), maintains operations in over 33 countries across Europe, North America, and Asia Pacific and employs approximately 19,500 people worldwide. Visit for information about our market positions, customers, brands, and organization.

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