Proposed Changes to Physician-Owned Hospitals by CMS Could Transform Healthcare

In 2026, the Centers for Medicare and Medicaid Services (CMS) proposed changes that could transform the landscape for physician-owned hospitals. The FY2027 Inpatient Prospective Payment System proposal includes a Request for Information to assess the potential participation of these hospitals in the Transforming Episode Accountability Model—an AI-driven bundled payment scheme covering procedures like coronary artery bypass grafts and spinal fusions. The proposal explores the possibility of waiving certain Affordable Care Act (ACA) provisions, particularly Section 6001, which currently limits Medicare involvement for new physician-owned hospitals.

Section 6001, enacted in 2010, restricts Medicare operations for physician-owned hospitals, imposing caps on beds and operating rooms due to concerns about preferentially selecting profitable cases. However, recent analysis reveals similarity in patient profiles between physician-owned and traditional hospitals, with potential Medicare savings exceeding $1 billion annually. Despite prior legislative efforts to amend Section 6001, the powerful hospital lobby remains a formidable barrier, although the current CMS inquiry provides a possible administrative path to revisiting these regulations.

Major healthcare organizations, such as the Blue Cross Blue Shield Association and American Hospital Association, oppose changes that would expand surgeon-operated facilities, preferring limited exceptions that maintain current structures. The inquiry's outcome, influenced by stakeholder input, could redefine physician ownership opportunities within the healthcare sector. As the June comment deadline nears, stakeholders are encouraged to share experiences and operational challenges. This feedback will be instrumental in shaping the future of physician ownership models, with a final decision anticipated in August, potentially altering how physicians participate in hospital ownership and operation.