In most fields, we celebrate innovators and experts that start new firms and improve efficiency. In health care, we’ve forbidden it for a decade.

In most sectors of the American economy, we celebrate the moment when insiders break away to build something better. Engineers start their own firms. Chefs open their own restaurants. Innovators leave incumbents and test their mettle in the market. Only in US healthcare do we treat that entrepreneurial impulse as a threat worthy of prohibition.

Section 6001 of the 2010 Affordable Care Act froze the growth of physician-owned hospitals (POHs) by barring new POHs from getting paid by Medicare and Medicaid, and by restricting the expansion of existing POHs. It did not ban POHs outright, but it had roughly the effect of a ban; after years of growth, the number of POHs in the US abruptly plateaued at around 230-250, and practically no new POHs have opened since 2010.

Supporters of the ban on POHs say it is needed to prevent conflicts of interest, cream-skimming, and overuse.

One argument is that without such a ban, POHs would cherry-pick the healthier and more profitable patients, leaving other hospitals with sicker and more costly patients. There is some evidence that physician-owned specialty hospitals tend to attract healthier patients and tend to focus on lucrative service lines. But why does that justify a ban on POHs? Specialization is one way that entrepreneurs create value. Cardiac centers, orthopedic hospitals, and focused surgical facilities exist precisely because repetition and standardization can improve outcomes and reduce costs. Specialty hospitals can even exert a positive influence on surrounding general hospitals to improve quality and reduce costs for everyone.

...read more at thedailyeconomy.org