“The most expensive piece of medical equipment is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.” Dr. Atul Gawande, an endocrine surgeon practicing at Brigham’s Women and Children Hospital in Boston, Massachusetts, wrote those words in the June 1, 2009, edition of the New Yorker in an article entitled, “The Cost Conundrum.” In that article, Dr. Gawande compared health care expenditures in McAllen, Texas, to its neighbor 800 miles up the road in El Paso, Texas. He found that Medicare expenditures in McAllen were $15,000 per enrollee, nearly twice the national average. Gawande could not attribute the rate of obesity, diabetes, and alcohol use to the differential because the town of El Paso had essentially the same demographic but only spent $7,504 per Medicare enrollee. After distilling out the various components of malpractice, defensive medicine, and demographics, Gawande made the conclusion that the differential between McAllen and El Paso, Texas, could only be explained by physician ownership of the main hospital in McAllen. Physician ownership of hospitals, writes Gawande, “gives physicians an unholy temptation to overorder.”
Timing is everything. Gawande’s article landed at a time when our country was in the throes of the debate over the Affordable Care Act in 2009. A White House staffer placed “The Cost Conundrum” into the hands of President Obama and it dramatically affected his thinking. In fact, Mr. Obama cited it while meeting with a group of Democratic senators. Senator Ron Wyden, Democrat of Oregon, describes the president putting the article in front of a group of senators and pointing to it stating, “This is what we’ve got to fix.”
There were several narratives in “The Cost Conundrum,” but the one that crystallized in the mind of lawmakers created a narrative that the skyrocketing cost of health care was due to physician ownership of hospitals. Mr. Obama’s “fix” was to eliminate physician hospital ownership which would, by his thinking, rein in health care spending at long last. After all, if federal law eliminated McAllen environments and created more Mayo Clinic type settings, concludes Gawande, health care coverage would be more affordable and accessible. A powerful message, in perfect pitch, at an ideal time. The American Hospital Association readily embraced the idea and, with physicians eliminated from hospital ownership, enthusiastically endorsed the ACA. Thus, lawmakers readily scribbled Section 6001 into the Affordable Care Act. A prohibition of physicians from owning hospitals was now the law of the land.
One problem: the data were incomplete. I am not questioning the data Gawande provided for McAllen, Texas. I am questioning whether lawmakers should determine a national policy based on data solely from a single small town in Texas. The United States health care sector is a complex landscape with considerable demographic and regional differences. To surmise that the health care practices conducted in McAllen, Texas, would be representative of the United States health care sector as a whole would be a tenuous argument to make.
A broader analysis of hospital data leads the objective mind to a completely different conclusion than what Gawande resolves in his “Cost Conundrum.” In an analysis of the grandfathered 250 physician-owned hospitals in the United States, CMS found that nine of the top 10 performing hospitals for quality, access, and cost were physician-owned. Further analysis of over 5,000 public and for-profit compared to physician-owned identified that 48 of the top 100 were physician-owned. The logical conclusion is that Gawande’s findings in McAllen’s physician-owned hospital cannot be extrapolated to the rest of the country. If anything, the data leads the rational mind to conclude that if quality, cost, and access are priorities, physician ownership should be expanded not curtailed.
But for 15 years, we have run the experiment of excluding physicians from hospital ownership, so we might as well look at the results. The data is unequivocal: costs have not decreased, nor has access to health care demonstrably increased. The law of unintended consequences has also brought unforeseen changes to the health care landscape.
History is replete of the unintended consequences of introducing a predator to control a rodent population. The introduction of the small Indian mongoose in Hawaii to protect sugar cane crops from rats resulted in devastating consequences for the native Hawaiian ecosystem. With an environment free from competition, the mongoose preyed more on native species than the rats in the sugar cane fields and nearly obliterated the local fauna while causing significant ecological disruption. Section 6001 accomplished exactly the same. Elimination of competition from physicians fostered an environment ripe for hospital consolidation. Vertical integration led to hospital acquisition of physician practices leading to higher prices without improvement in quality. Hamstrung physicians responded in kind with abandoning private practice for hospital employment in droves. In the aftermath of the ACA, a significant shift has occurred in physicians opting to become employed. In 2012, 53.2 percent of physicians were owners of their practices. In 2022, that number plummeted to 44 percent, a trend that continues. The absence of control in their professional lives is a leading contributor to physician burnout, compounding the current physician workforce shortage. Section 6001 of the ACA is making the private practice physician an endangered species.
The $4.9 trillion health care sector of the U.S. economy is exceedingly complex and byzantine. Oversimplification has its perils. Attributing skyrocketing costs of health care to physician ownership of hospitals is a tragic example of oversimplification in a complex system. The assumptions were flawed from the outset. The past 15 years and our current socioeconomic landscape have invalidated all the assumptions made in 2010 regarding physician hospital ownership. But what makes matters worse are the unintended consequences. Section 6001 of the ACA has proven to decrease competition and increase cost without necessarily increasing quality. Our current state is the categorical antithesis of the promises assured to Americans with the ACA.
The time has come to run a new experiment. Not a seismic shift, but instead a subtle incremental change. Repeal Section 6001. Empower the physician. Create competition. Align incentives. After all, we are the doctors. We still own the pen caps. And hospital administrators don’t. But for the health care of the future to improve, we need to be part of hospital ownership too.
Luis Tumialán is a neurosurgeon.
