The Affordable Care Act's Effects on the Formation, Expansion, and Operation of Physician-Owned Hospitals

The Affordable Care Act (ACA) imposed new restrictions on the formation and expansion of physician-owned hospitals. These restrictions provided incentives for the hospitals and their owners to take preemptive actions before the effective dates of ACA provisions and modify operations thereafter. We studied 106 physician-owned hospitals in Texas to determine how they responded to ACA restrictions. We found that there were significant pre-ACA increases in the formation, physician ownership, and physical capacity of physician-owed hospitals, which suggests that they reacted quickly to the policy changes. After the ACA's provisions took effect, the hospitals improved the use of their assets to generate increased amounts of services, revenues, and profits. We found no evidence that existing physician-owned hospitals stopped accepting Medicare to avoid the ACA restrictions, although some investors have adopted a seemingly unsuccessful strategy of not accepting Medicare at physician-owned hospitals formed after implementation of the ACA. We conclude that the ACA restrictions effectively eliminated the formation of new physician-owned hospitals, thus accomplishing what previous legislative efforts had failed to do