Do Mandated Growth Restrictions Destroy Physician Owned Hospital Value?

Published by PHA Pulse

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the “Legislation”) contain controversial and well publicized regulations that significantly restrict the growth capabilities of physician owned hospitals (“POHs”). For certain POHs, including the 60 or so currently under development, this legislation could have devastating implications. For the approximately 270 existing POHs that are grandfathered and allowed to operate under the legislation, the ultimate question for the physician, hospital or corporate shareholder is: Does this legislation negatively impact the value of my POH, and if so, by what magnitude?

Although determining the cumulative effect of the Legislation in its totality, including restrictions on aggregate physician ownership and the moratorium on new development, is crucial when contemplating individual POH value, this discussion focuses exclusively on the growth restrictions levied against POHs and the impact of these restrictions on value.

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