California Hospital Foundation's Attack on 40 Physician-Owned Inpatient Beds is Unfounded.

The San José Business Journal (via California Healthline) reports on the current target of the California Hospital Association's campaign against physician-owned hospitals: the planned California Center for Healthcare and Biomedical Technology, which is due to break ground next year.

California is not a state that suffers under "Certificate of Need" laws, whereby the state protects incumbent hospitals from competition.  Nevertheless, since the federal moratorium on physician-owned hospitals expired in 2005, California's not-for-profit hospitals have lobbied to prevent competition.  But anti-competitive rules have neither improved quality in the incumbent hospitals, nor contained costs, as Roy Cordato explained in a 2006 book I edited. (Be the first on your block to own a copy!)

According to the CHA, physician-owned hospitals "can cherry pick the well-insured patients and leave community hospitals to take care of the uninsured and Medi-Cal patients". (Medi-Cal is California's Medicaid program.)  Are these charges true?  Well, there is some evidence that physician-owned hospitals focus on more profitable cases.  (See, e.g., J.M. Mitchell, "Effects of physician-owned limited-service hospitals: Evidence from Arizona," Health Affairs Web Exclusive, October 25, 2005).

OK, let's say, for argument's sake, that it's all true: the doctors' hospitals cherry pick......So What?  Last year, the Government Accounting Office concluded: General Hospitals: Operational and Clinical Changes Largely Unaffected by Presence of Competing Specialty Hospitals.  Furthermore, physician-owned hospitals did not cause the malformation of health insurance that weighs the not-for-profit hospitals down with bad debts from uninsured (and, increasingly, insured) patients.

Nor are physician-owned hospitals responsible for Medicaid and other government programs underpaying hospitals, which leads to cost-shifting to the privately insured.  In fact, the taxes they pay as profit-making businesses subsidize the MediCal patients and tax-breaks enjoyed by the not-for-profit hospitals!

Such ingratitude would be laughable outside the hospitals' world.  Imagine if a homeless shelter demanded that the state outlaw for-profit property developers from building homes on its "turf"!  How would that help the homeless problem?  Or a food bank trying to outlaw supermarkets!

It's tragic to see this nation's hospitals, where countless medical miracles are performed every day, continue to oppose good public policy.