Effects of physician-owned limited-service hospitals: evidence from Arizona

In recent years physician ownership of so-called limited-service hospitals has become commonplace in many states lacking certificate-of-need regulations. Empirical evidence documenting the effects of these facilities is sparse. This study compares practice patterns of physician-owners of limited-service cardiac hospitals and physician-nonowners who treat cardiac patients at competing full-service community hospitals. Analyses of six years of Arizona inpatient discharge data show that physician-owners treat higher volumes of profitable cardiac surgical diagnosis-related groups (DRGs), higher percentages of low-severity cases, and higher percentages of cases with generous insurance compared with physician-nonowners who treat cardiac patients in community hospitals.