Bringing back physician-owned hospitals: a rural success story

Dermatologist Jon Ward, M.D., grew up in the Florida Panhandle. Disillusioned after just one year as an employed physician, he returned home and opened his own practice. Over the next two decades, he expanded that solo practice into a 32-location organization operating across four states, with a particular focus on providing skin cancer care in rural communities.

With that success, Ward could have done almost anything: retire early, travel the world or buy a fleet of sports cars. Instead, he decided to help buy a rural hospital.

A rural hospital in distress

HealthMark Regional Medical Center, a 25-bed hospital in rural DeFuniak Springs, Florida, had been struggling for years. Ward and several colleagues had approached its owners before the facility closed, hoping to find a way to save it.

"The hospital was really near and dear to my heart because I have friends and family who live in the area who had no other access to emergency care," Ward said. "We knew they were in financial distress, so we approached them to do something before they closed. But the price point didn't make economic sense, so we had to walk away."

The facility closed in 2022. About a year later, the owners reopened negotiations at a more realistic price. Ward reached out to physician colleagues through his local and state medical associations and began assembling a financing plan that could restore hospital services to the community.

Buying a hospital is complicated. Buying one with physician investors is even more so.

The federal physician self-referral law, commonly known as the Stark Law, once included a whole-hospital exception that permitted qualifying physician ownership. Section 6001 of the Patient Protection and Affordable Care Act sharply narrowed the whole-hospital and rural-provider exceptions, effectively blocking most new physician-owned hospitals from qualifying for them. As a result, physicians who own an interest in a hospital generally cannot refer Medicare patients there unless a specific exception applies.

Ward and his partners structured the venture with those restrictions in mind. "We went in understanding that the physicians who were owners could not refer patients to the hospital," he said. "That was OK for me because I'm a dermatologist, so I don't refer patients to the hospital. One of my partners is a retired emergency physician, so she doesn't refer patients either."

That initial group raised approximately $3.7 million. For physicians who wanted to support the hospital but might also refer patients or work there, the group used another mechanism: promissory-note loans offered on the same terms available to nonphysician lenders. Those loans raised an additional $3 million to $4 million. Working with a bank and a private lender, the group assembled the remaining financing needed to purchase the hospital.

Bringing it up to code

The purchase was only the beginning. Because the hospital had closed, Florida regulators required the facility to meet current hospital building codes before it could reopen — a requirement that Ward said would not have applied in the same way had the group been able to acquire it while it was still operating.

"It was a significant investment — about $16 million — even without renovating the entire inpatient wing," he said.

To limit the initial capital expense, the group converted the former intensive care unit into two inpatient beds and added two observation beds. The remaining inpatient wing was left for a later phase, with space for more than 20 additional beds when expansion becomes financially feasible.

The financing package drew on several rural economic development programs. According to Ward, the hospital obtained a U.S. Department of Agriculture (USDA) Business and Industry guaranteed loan, a zero-interest USDA Rural Economic Development loan, and a Department of the Treasury loan available in economically distressed areas. The Treasury loan includes principal forgiveness after seven years.

Surviving the first year

During the renovation and initial operating period, the hospital lost approximately $7 million. The partners had expected a substantial early loss, but anticipating it did not make the experience less harrowing.

"There were at least six months of payroll when I didn't know how I was going to pay the bills," Ward said. "I think I hit rock bottom when I had to liquidate my investment accounts."

He held on long enough for the hospital to turn the corner. Ward said North Walton Doctors Hospital broke even during calendar year 2025.

The key was understanding which services could sustain the hospital financially. "We knew the ER, laboratory and imaging services weren't going to make money," Ward said. "We knew outpatient surgery would be the profit center."

The hospital worked quickly to obtain insurance contracts and open its operating rooms. Orthopedic and spine surgeons had already committed to performing procedures there, providing a revenue stream that could help support essential but less profitable services.

The hospital also benefited from federal and state payments for Medicaid and uncompensated care. Florida's Medicaid Direct Payment Program provides supplemental hospital payments that help offset Medicaid shortfalls, but the payments are based on a prior period. A new hospital therefore must deliver the care and survive the first year before receiving the corresponding support.

More recently, North Walton received $4.6 million through Florida's Rural Health Transformation Program allocation. Ward said the award will support an MRI and expanded telehealth services, including teleneurology, telepsychiatry and telecardiology. Separate state funding is supporting a women's health program, including mammography, while another state appropriation is helping fund a mobile lung cancer screening unit.

Rebuilding hospital services

North Walton Doctors Hospital now offers emergency care, laboratory testing, diagnostic imaging, orthopedic and spine outpatient surgery, and interventional pain procedures. Its emergency department is staffed primarily by board-certified emergency physicians, with a limited number of shifts covered by highly experienced nurse practitioners and physician assistants who have an emergency physician available for backup. The campus also provides access to outpatient specialists, including cardiology, dermatology, orthopedics and pain management.

Ward hopes eventually to renovate and open the remaining inpatient wing and add service lines such as general surgery. Demand is not the problem; capital is.

"We could use the inpatient beds now," he said. "It's just going to cost about $5 million to bring that wing up to the current code."

Ward questions whether every element of the hospital building code is driven by patient safety. Some requirements, he argues, function as barriers to market entry by making it prohibitively expensive for smaller competitors to open or expand facilities.

The hospital faces another structural disadvantage when negotiating with insurers. According to Ward, large regional health systems may receive two to three times as much as North Walton for the same services.

"They won't negotiate with us because they say they don't need us," he said. "Their position is basically, 'You're just a little rural hospital in Walton County. Here's the best rate. Take it or leave it.'"

That disparity exposes an important limitation of hospital price transparency. Patients may be able to compare posted prices, but small hospitals still negotiate in a market where dominant systems command far greater leverage — and where insurer payment rates remain largely invisible to the public.

Making room for physician ownership

With the federal government making a major new investment in rural health, Ward believes policymakers should go one step further: create a practical path for physicians to own and operate rural hospitals.

"I really think we could come together as physicians and say, 'At least in rural areas, why not let physicians own the hospital?'" he said. "Then we would have the data to compare cost and quality."

Ward believes physician ownership could produce better outcomes, higher patient satisfaction and lower costs. Existing physician-owned hospitals — those largely grandfathered under the 2010 law — offer a potential basis for comparison. But current policy makes it extremely difficult to create new physician-owned hospitals and test that proposition in communities where competition and access are most desperately needed.

The solution does not have to be an immediate nationwide repeal, Ward said. Congress could begin with a carefully designed rural exception, coupled with transparent ownership disclosures, quality reporting and safeguards against inappropriate self-referral. If physician-owned rural hospitals deliver better access, quality and value, policymakers would have evidence to guide broader reform.

For Ward, physician ownership is also part of a larger question facing the profession: Will the next generation of physicians become employees of increasingly consolidated systems, or will some learn how to build and control the institutions in which they practice?

"It starts with young medical students and residents who are deciding whether they're going to join corporate medicine or take control of their own lives," he said. "If you work for someone else, you are not fully in control of your own life."

And you certainly will not be in a position to buy a rural hospital.

Rebekah Bernard, M.D., is a family physician in Fort Myers, Florida, and the author of four books on health care topics.

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Editor's note: Episode timestamps and transcript produced using AI tools.

0:00 Cold open. Bernard frames the question the episode turns on: could letting physicians own and operate rural hospitals be the way to save them?

1:01 Meet Jon Ward, M.D. A board-certified dermatologist and Mohs surgeon in Panama City, Florida, with 32 locations across four states — and, since 2024, a hospital administrator.

2:05 Bernard on what he could have done with the money instead: retire, travel, stop. He bought a hospital.

2:41 The deal that came back around. A first approach to HealthMark Regional collapsed on price. The hospital closed in 2022, and by mid-2023 the owners were willing to talk again.

4:44 Built in 1990 by a single non-physician owner, with an emergency department that wasn't physician-staffed and a reputation the new owners would have to repair.

5:31 The Stark Law and the whole hospital exception. Ward walks through what the Affordable Care Act changed in 2010 and why physician owners can no longer refer to their own hospital.

7:45 Bernard on the logic behind the ban — and who it left running hospitals instead.

8:54 The second path. Physicians can own the land and buildings without owning the operating entity, and still refer, as long as rent is at fair market value.

9:42 Raising the money. About $3.7 million from colleagues through the local and state medical associations, plus $3 million to $4 million in promissory-note loans from physicians who needed to keep referring.

11:06 The financing stack. USDA business and industry and rural economic development loans, and a Treasury loan whose principal is forgiven after seven years. The first year still cost them about $7 million.

12:34 Finding the profit center. The emergency department, labs and imaging were never going to pay for themselves, so the priority was insurance contracts and open operating rooms.

13:41 Charity care and the trailing year. Under EMTALA the emergency department sees everyone. Florida's Direct Payment Program makes up some of the Medicaid loss, but the first check arrives a year late.

15:17 Medicaid cuts on one side, $50 billion for rural health on the other. North Walton's $4.6 million award pays for an MRI, teleneurology, telepsychiatry and telecardiology.

16:39 Cash pay. A few self-pay surgeries a month, priced off the Medicare rate. Ward and Bernard compare that with their own deductibles.

18:41 The other half of transparency. Ward says the large systems are paid two to three times more for the same work, and that posted prices mean little while insurer rates stay hidden.

20:51 What the hospital offers now. Labs and imaging, mammography coming at year's end, orthopedics, spine and interventional pain, and a mobile lung cancer screening unit headed for employers and fire stations.

23:04 The unopened wing would cost about $5 million to bring up to code. Ward argues the code has less to do with patient safety than with keeping new entrants out.

23:59 Winning the community back. Leading with physician ownership, asking every patient for a review, and six months later the highest rating in the area.

25:33 The ask. Not a nationwide repeal — a rural carve-out first, which would finally generate the cost and quality data to argue the rest.

27:46 Ward on students and residents choosing between corporate medicine and control of their own time.

28:25 The business education nobody gets. He took a job out of residency, spent a year with the practice's business manager, then went home and opened his own. His advice: sit with the administrator and ask about collections and claim rejection rates.

31:10 One practice to 32 locations. Going where dermatologists weren't, focusing on skin cancer, then repeating the model.

32:39 Advice for anyone tempted to try it. Model the pro forma, expect to lose money in year one and don't buy the MRI before you need it.

34:01 Rock bottom. At least six months of payroll he wasn't sure he could cover, and the day he liquidated his investment accounts to keep the doors open.

35:00 Bernard's close: you don't have to punch a clock. You can own your practice, and you can own a hospital.