Why private equity can own a hospital and a physician can't, with Gary Price, M.D., of The Physicians Foundation

A group of private equity investors can buy a hospital. A physician, under federal law, generally cannot build one. The Stark law restricted physician ownership of health care facilities, and a provision of the Affordable Care Act closed the remaining path in 2010. The physician-owned hospitals already operating were allowed to stay open, but barred from adding beds or services.

Medical Economics Senior Editor Richard Payerchin sat down with Gary Price, M.D., MBA, president of The Physicians Foundation and a board-certified plastic surgeon who spent decades in independent practice in Connecticut.

Price argues the restrictions rest on a misreading of data that researchers corrected 25 years ago and policymakers never revisited. In this episode, he walks through what the evidence shows on cost and quality at physician-owned hospitals, why markets that have them consolidated less than the rest of the country, and how much of the burnout physicians describe comes down to being held responsible for care they no longer control.

This conversation was recorded in April, while CMS was taking comment on its request for information about physician-owned hospital participation in the Transforming Episode Accountability Model. That comment period closed June 9. CMS published its fiscal year 2027 inpatient payment final rule Aug. 4, discussing the comments it received without finalizing an opt-in policy and indicating that any change would come through future rulemaking.

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Editor's note: Episode timestamps and transcript produced using artificial intelligence (AI) tools.

0:00 – 0:16 | Cold open. Price on why the Mayo brothers could not have founded the Mayo Clinic under current law.

0:16 – 1:35 | Introduction. Austin Littrell introduces the episode and the guest.

1:35 – 2:34 | Meet Gary Price, M.D., MBA. Payerchin asks what the Affordable Care Act did to physician ownership of hospitals.

2:34 – 4:24 | What the law actually does. The Stark law came first, the ACA finished the job, and existing physician-owned hospitals were grandfathered in but barred from adding beds or services.

4:24 – 5:52 | The CMS request for information. Price explains the question about letting existing physician-owned hospitals opt into a value-based model built on episodes of care, and puts their share at 5% to 6% of hospitals.

5:52 – 6:56 | What policymakers feared in 2010. Cherry picking, lemon dropping and the assumption that physician-owned hospitals would take only the healthiest, cheapest patients.

6:56 – 8:22 | What the research found instead. A 2023 study co-funded by The Physicians Foundation and the Physician Advocacy Institute found almost no difference in patient acuity or social status, and Medicare costs 7% to 15% lower.

8:22 – 9:05 | The most expensive piece of equipment in the hospital. How the policy world came to treat the physician's pen as the source of cost variation.

9:05 – 10:45 | Where that idea came from. Price traces it to a reading of the Dartmouth Atlas around 2000, and to a researcher whose zip code analysis found income, not physician behavior, tracked with cost.

10:45 – 11:57 | A clarification on cost. Payerchin asks what the income finding implied about billing. Price says the figures were Medicare costs, not out-of-pocket.

11:57 – 14:11 | Consolidation, and the burnout it feeds. Markets with physician-owned hospitals consolidated less. Price connects the loss of physician control to the frustration doctors describe daily.

14:11 – 15:02 | P2 Management Minute. Keith Reynolds shares practice management tips and invites listeners to submit their own workflow ideas.

15:02 – 16:34 | Does the request for information signal a real shift? Price calls it the first opening in 15 years, but notes the same 2010-era assumptions are written into the questions.

16:34 – 17:42 | The practical problems. Participating hospitals might need to add beds they are legally barred from adding, and the model ends in 2030.

17:42 – 19:23 | Legislation, and the case for physician-led management. Several bills sit on Capitol Hill with no action, and physician-owned hospitals charge cash-paying patients 47% less.

19:23 – 21:22 | Who is supposed to own the hospitals? Certificate-of-need laws, the corporate practice of medicine, and Price's observation that private equity investors face no equivalent bar.

21:22 – 23:46 | What ownership looks like at the bedside. The test a physician orders, the administrator who says it is not on the approved list, and where the core frustration begins.

23:46 – 24:41 | A lesson from the 1970s. The question Price asked residents before approving a test.

24:41 – 26:14 | Does overutilization still happen? Price says yes, driven by financial incentives, and argues the real fraud in the system is large-scale rather than bedside.

26:14 – 29:07 | Connecticut as a case study. Two systems control most of the care in the state. Price describes being told an insurer would negotiate only with hospitals.

29:07 – 31:14 | Why bigger is not cheaper. Price argues health care has no economies of scale and points to administrator growth far outpacing clinicians.

31:14 – 32:57 | It mystifies me. What Payerchin did not ask: why physician participation is treated as intrinsically bad in health care and nowhere else in the economy.

32:57 – End | Closing thoughts and outro. Payerchin thanks Price and Littrell wraps the episode.