After more than a decade of constraints, physician-owned hospitals may be on the verge of a resurgence, driven by new federal payment models and pending legislation.
CMS opens the door
CMS’ new Transforming Episode Accountability Model is the most significant mandatory bundled payment program in recent history, affecting nearly 750 hospitals across 188 geographic markets.
Having launched in January, the five-year model requires participating hospitals to manage costs and quality across five surgical episodes, including lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure. This also includes spending 30 days post-discharge.
The model aims to “incentivize care coordination, improve patient care transitions and decrease the risk of avoidable readmission,” according to CMS. Now, the agency is signaling it might want physician-owned hospitals at the table.
In its proposed 2027 Hospital Inpatient Prospective Payment Systems rule for Acute Care Hospitals, CMS included a request for information specifically about physician-owned hospital participation in TEAM. Public comments are due June 9.
Legislation on the move
The regulatory signal from CMS comes alongside a push in Congress.
The most targeted approach is HR 2191, the Physician Led and Rural Access to Quality Care Act, reintroduced in March 2025 by Rep. Morgan Griffith, R-Va., with 16 co-sponsors. The bill would permit physicians to own rural hospitals as long as the facility is more than a 35-mile drive from a main patient campus or critical access hospital, or 15 miles in mountainous terrain, and would also lift severe limits on expansion of existing physician-owned hospitals. The bill has been referred to the Committee on Energy and Commerce and the Committee on Ways and Means, where it remains pending.
In June 2025, Reps. Beth Van Duyne, R-Texas, and Henry Cuellar, D-Texas, introduced HR 4002, the Patient Access to Higher Quality Health Care Act, a more sweeping proposal. Rather than carving out rural exceptions, the bill would repeal the statutory restrictions on the whole hospital exception to the Stark physician self-referral law entirely, eliminating the barriers that prevent the formation or expansion of physician-owned hospitals nationwide. In November, the American Medical Association led a sign-on letter with 90 co-signers urging the House to pass HR 4002. The bill has been referred to the House Energy and Commerce and Ways and Means Committees, where it remains pending.
The opposition remains formidable, however.
The American Hospital Association wrote in opposition to HR 4002 in July, arguing the bill “would result in additional gaming of the Medicare program, jeopardizing patient access to emergency care, potentially harming sicker and lower-income patients, and severely damaging the safety-net provided by full-service community hospitals across the nation.”
The hospital lobby’s core concern is that physician-owned facilities cherry-pick healthier, more profitable patients while offloading complex cases to full-service competitors and has long been the central objection.
The AMA, on the other hand, pointed to a 2005 CMS study that found no consistent differences in referral patterns between physician owners and peers, concluding there was no evidence that referrals were driven primarily by financial gain. Additionally, a report analyzing 2019 Medicare data found that total payments for some of the most expensive diagnostic groups were between 8% and 15% lower in physician-owned hospitals than traditional facilities.
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