Physician‑Owned Hospitals Opening

The Centers for Medicare & Medicaid Services has opened a narrow path for physician-owned hospitals to reenter Medicare policy discussions in its 2027 hospital payment rule. (cms.gov) The agency posted the fiscal 2027 Inpatient Prospective Payment System proposed rule on April 10 and published it on April 14, with comments due by 5 p.m. Eastern on June 9, 2026. (cms.gov) That rule includes a request for information tied to the Transforming Episode Accountability Model, or TEAM, a mandatory Medicare model that holds selected acute-care hospitals responsible for spending and quality during surgery and the 30 days after discharge. (cms.gov) TEAM already covers five surgical episodes — joint replacement, hip and femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedures — and runs from January 1, 2026, through December 31, 2030, in selected metro areas. (cms.gov) Physician-owned hospitals have faced tight Medicare limits since the Affordable Care Act’s Section 6001 changed the Stark Law exceptions in 2010. CMS says those hospitals generally cannot add beds, operating rooms, or procedure rooms beyond the capacity they were licensed for on March 23, 2010, unless they win a specific expansion exception. (cms.gov) CMS has continued to process those case-by-case expansion requests. A Federal Register notice published on February 11, 2025, asked for public comment on one hospital’s request for an exception from the ban on expanding facility capacity. (federalregister.gov) The practical question now is whether Medicare will let some physician-owned hospitals participate through a demonstration or waiver rather than through a broader statutory rewrite. The CMS Innovation Center says its models are designed to test payment and service-delivery changes that can expand access and change how providers are paid. (cms.gov) That matters locally because TEAM participants are hospitals in selected Core-Based Statistical Areas, and CMS updates a public participant list that already includes hundreds of acute-care hospitals as of January 12, 2026. Any opening for physician-owned hospitals would land inside markets where referral patterns and post-surgical care are already being reorganized around episode-based payment. (cms.gov) Hospital industry groups are pushing back. The American Hospital Association said physician-owned hospitals treat younger and less medically complex patients, report fewer quality measures than full-service hospitals, and posted higher average readmission penalties in its cited analysis. (aha.org) A separate March 2026 analysis for Federation of American Hospitals modeled new rural physician-owned hospital entry and found lower margins for existing sole community hospitals across all three test scenarios, with losses in two of them. (fah.org) Physician-owned hospital supporters have argued for years that the 2010 restrictions froze a class of facilities that physicians say can move faster on surgery-focused care. CMS has not proposed a full repeal of Section 6001, but its June 9 comment window gives hospitals, doctors, and competitors a live chance to shape how narrow this opening stays. (cms.gov)