Physician Ownership of Healthcare Facilities

posted in: Issue #1 | 1

Written By:   Keith Smith MD

Congratulations to Dr. Higgins and his colleagues on the launch of their website and Journal. Prior to launching our website, we knew that outpatient surgery centers in general (and ours in particular) provided higher quality care, better access and all at lower prices. After launching our price- displaying website, we had confirmation as patients traveled to see us from all over the United States and even from outside of this country. I predict that many of you in the Greater Austin area will soon see that Dr. Higgins’ honest and transparent pricing in combination with the intense accountability that physician ownership of a facility naturally brings, will result in even more improved access, quality and yes, even better pricing in the urgent and emergent care scene than what Dr. Higgins has already demonstrated. What follows is an adaptation of a blog I wrote about a year ago in support of the physician ownership of the facilities to which patients are referred. I am honored to be asked to contribute to the original “launch” in edition of this website and Journal.

A fellow physician told me recently that he had seen a worker’s compensation patient who had been treated and released by another surgeon for a wrist fracture. He was now in my friend’s office complaining about his hips, knees, spine and shoulders. The patient’s records indicated that he had recently seen an occupational medicine doctor who had ordered 12 MRI scans, all performed at a facility in which he had an ownership interest. He then recommended that the patient have both knees and both shoulders operated on by his business associate, a surgeon who also has an ownership interest in the same MRI facility and one not known for his ethical leadership skills.

Before you conclude that this is an argument against physicians owning and controlling medical facilities, consider the following.  An orthopedic surgeon employee of a local hospital was called on the carpet for not ordering enough MRI scans on his patients. The next month he ordered 77 of them to get the administration off of his back.

How are these two stories different? In the first instance, rogue and unethical physicians have positioned themselves to take complete and utter advantage of the third party system known as worker’s compensation, a notoriously corrupt system where many times unscrupulous lawyers team up with unscrupulous physicians to insure that the medical bills, and hence, the “settlement” amount is maximized. These physicians and their actions hurt the reputations of all physicians, not just those of us who own and control medical facilities. After all, physician ownership of a medical facility represents a situation, which almost invariably benefits patients financially when compared to any alternative, as no physician owner greed or inefficiency can begin to approach that of the average corporate hospital. In fact, physician ownership can almost completely eliminate institutional profit-seeking altogether, as the vast majority of physicians are more than happy to receive fair compensation for their professional services, alone, feeling no need to hit a bankrupting grand slam as do many of the hospitals. (It is no mystery that those seeking the highest quality care at the most affordable prices invariably end up at a physician-owned facility.)

In the second instance we are witness to the institutionalization of corruption and fraud, rather than an exception. Unlike the first example, a regrettable and shocking exception, the second is just the way business is done…business as usual. Remember that the hospital administration leaned on the physician employee, just as they had leaned on many others, to act in this unethical way, this theft becoming standard operating procedure, company-wide policy.

Whenever I hear the hospital cronies complain about conflicts of interest for physician facility owners, I ask the rhetorical question, “If it’s wrong for physicians to own hospitals, why is it o.k. for hospitals to own physicians?” Those in the hospital business that would denigrate physician ownership in general while hoping no one will notice the magnitude of their established and unethical ways, is not unlike the federal government’s prosecution of Bernie Madoff, all the while conducting a little Ponzi scheme of their own known as social security. Bernie stole a billion. Social security has stolen trillions. Also keep in mind that the federal government, Obamacare, in particular, has pushed hard for the “physician-as- employee” model, directly attacking the institution of the private practice of medicine and insuring the predominance of the giant hospital brand of fraud.

Are there some bad physician actors out there? Of course there are. I was invited to attend a legislative health policy roundtable in Austin, Texas last year (even though I practice in Oklahoma City) where I listened to health policy folks go on and on about a particularly notorious and unethical physician-owned hospital in Texas, while they defended the predatory and bankrupting giant hospital “systems” in their state, whose criminal practices are widespread and institutionalized. I would further make the point that most of the unethical physician actors are unwelcome in physician-owned facilities such as mine as the mere association with doctors like this would affect the reputation of our facility and that of each of us as private practitioners. This phenomenon of shunning actually increases the concentration of the unethical actors that are hospital employees, I would argue, a condition that bodes well for the profits of the institution with which they are affiliated, but bodes poorly for patients ending up in their lair.

What is the real problem? The real problem is the absence of the free market. It is the presence of third parties and the absence of the sticker shock that introduces the moral hazard into medical economics. When someone else is paying, patients are not inclined to question these aggressive money-making schemes by the bad actors, whether the occasional rogue physician-owners, or routinely abusive hospitals and their employed doctors. The introduction of price transparency is the beginning of the end of these scams, as a hard look at the pricing begs questions of value.

”Is a tonsillectomy at this big hospital 10 times as good, because it costs ten times as much?”

”Is it necessary for me to have all of this expensive lab work prior to surgery at the hospital when the physician-owned facilities usually require no lab work whatsoever, in accordance with national standards?” ”Do I really need all of these MRI’s and surgeries?”

”Is this doctor sending me to this MRI facility because his employer is pressuring him to keep his numbers up?”

Let’s not let a few bad apples in the physician-owner group cause us to take our eye off of the most unethical promoters of unnecessary care: the giant, corporate hospitals and the doctors that work for them. It is they who have created and manipulated a dysfunctional, largely “corporatist” system to their outrageous advantage, subjecting countless individuals to bankruptcy, and shoved this country to the brink of insolvency.


“Dr. Keith Smith is an innovator in the field of out patient surgery that has gotten national attention by going against the grain and advertising his out patient surgery centers prices. This “transparency” has made his surgical center extremely popular and garnered the interest of multiple news organizations. We feel that Out Patient Surgical Centers share much in common with Free-Standing ERs as once only hospital-operated businesses are now becoming physician owned. We appreciate the kind words from Dr. Smith regarding our start up Journal but more importantly we study him as he has much to teach us regarding satisfying the healthcare needs of our population.”

– JFSEM Editorial Staff

One Response

  1. Spencer Smith

    I agree. It certainly seems that the more removed and faceless an entity is, the harsher it can be in its compensation efforts. As members of physcian owned groups often work face to face with their patients and are members of the same community as their patients, honesty and ethics also become a motivation that may be farther removed in corporate C-suites.

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