Monday, June 9, 2008

Markets vs. bureaucrats: doctor-owned hospitals

Behind the policy war over the proliferation of doctor-owned hospitals are two competing visions of whether health care demand is best supplied by for-profit capitalists or by caring central planners.
Critics say that when doctors have a financial stake in a hospital, they have an incentive to send patients there because they not only receive professional fees for their services, but also can share in hospital profits and see the value of their investment increase. Such arrangements can lead to greater use of hospital services and higher costs for Medicare and other insurers, say the critics, including many in Congress.
On the other side of the issue, doctor-owned hospitals are typically faster, cheaper and better because they focus on only a limited number of procedures. However, they may lack the ability to handle complications or co-morbidities, and may "cream skim" the best (lowest cost) patients from general acute-care hospitals. The map above indicates that states have different policies towards doctor-owned hospitals. Maybe we can learn something from this cross state variation.

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