The crucial question regarding the structure of the healthcare market for the next decade is currently the subject of a federal comment period, which ends on June 9. However, few people outside the medical lobby and hospital associations are aware of its existence.
On April 10, 2026, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule for the Inpatient Prospective Payment System for fiscal year 2027, referred to as CMS-1849-P. Among its details is a request for information asking whether physician-owned hospitals should be allowed to voluntarily participate in the episode-based care transformation model, and if CMS’s Innovation Center under Section 1115A can waive specific provisions of Section 6001 of the Affordable Care Act (ACA) to facilitate this. The final rule is expected in August.
This issue transcends mere payment models; the real concern revolves around whether a fifteen-year legislative protection that has eliminated the surgical competition held by physicians in the U.S. healthcare market can be lifted administratively through demonstration authority. This matter directly affects the healthcare system’s market position, the structure of physician entrepreneurship, employer cost trajectories, and payer strategy—all of which will be addressed in some manner before many healthcare leaders have finished reading this article.
Questioning Market Structure
Section 6001 of the Affordable Care Act, which took effect in 2010, barred physician-owned hospitals from participating in Medicare. This move was heavily supported by the American Hospital Association (AHA) and the Federation of American Hospitals (FAH), which argued it would reduce patient selection issues. The structural result was the elimination of a competitive category that threatened the dominant position of the healthcare system in the high-margin surgical intervention market.
The claim of patient selection has since faced scrutiny. A 2023 study commissioned by the Physicians Advocacy Institute and the Physicians Foundation analyzed 650,386 Medicare discharges from 186 physician-owned hospitals and found that patient demographics and comorbidity levels were statistically similar between these hospitals and traditional facilities in the same reference regions. The study projected Medicare savings of approximately $1.1 billion annually—a headline conclusion that has garnered significant attention.
Contrasting studies exist. An assessment by Dobson DaVanzo, commissioned by the FAH in 2023, discovered that physician-owned hospitals treat younger, less complex patients who are less likely to be dually eligible and have lower uncompensated care costs. Both studies will be cited during the comment period. Yet neither study resolves the overarching question of market structure: What impact does the absence of physician-owned surgical competition have on commercial prices, and what effects might its reintroduction yield?
The consolidation resulting from Section 6001 has led to a documented market trajectory. As of 2024, nearly 80% of all physicians were affiliated with hospitals, health systems, or other organizations. During the same period, the pricing power of healthcare systems in consolidated markets has markedly increased. This causal chain is complex, with consolidation driven by various factors, but the removal of physician-owned surgical competition has accelerated market concentration—now a primary cost concern for self-funded employers and an active implementation priority for federal regulators. The Department of Justice’s Antitrust Division is actively examining healthcare market concentration through its Healthcare Monopolies and Collusion Task Force. In May 2025, the Blue Cross Blue Shield Association (BCBSA) explicitly connected the issue of physician-owned hospitals to the antitrust enforcement landscape, adding context to the CMS request for information.
What the RFI Truly Tests
TEAM is a mandatory five-year bundled payment model encompassing coronary artery bypass grafting, lower extremity arthroplasty, major intestinal surgeries, surgical treatment of hip and femur fractures, and spinal fusion procedures. Currently, around fifteen physician-owned hospitals are already required to participate in TEAM based on their geographical markets. The request for information seeks to determine whether voluntary participation should be expanded beyond these markets and if operational waivers regarding bed counts, operating room caps, and service range restrictions are sufficiently generous to allow physician-owned hospitals to broaden their engagement.
The Innovation Center’s authority under Section 1115A was created to test payment and delivery alternatives that Medicare law would otherwise prohibit. CMS is asking whether this authority specifically encompasses Section 6001. If the demonstration is designed broadly, CMS could generate real comparative data on costs and episode quality that validates or refutes the efficiency argument at scale. Conversely, if narrowly designed—allowing only established facilities, excluding specialized surgical hospitals, and applying limited operational waivers—the data would remain scant, leaving the question unanswered and effectively ratifying the existing legislative status quo for another regulatory cycle.
Potential Market Scenarios
If CMS allows broad opt-in with significant waivers, the market implications extend across all stakeholder categories. For health systems, particularly those that have secured a dominant market position in orthopedic, spinal, cardiac, and general surgery, this scenario would introduce the first significant competitive threat to surgical pricing in fifteen years. While the competitive pressure may not materialize immediately—building and developing physician-owned surgical facilities requires time and capital—the market signal changes. Contract negotiations on commercial markets offering viable physician-owned alternatives differ from those in markets lacking such options.
For physicians, a wide opt-in would reopen ownership structures that have been closed since 2010. While capital requirements for specialized physician-owned hospitals are substantial, structural options would again be available. This scenario significantly alters the investment calculation and development landscape for physician groups and entrepreneurial physicians who have shifted towards ownership models outside employment.
For self-funded employers, broad voluntary participation signals a medium-term planning imperative. Direct contracting strategies and centers of excellence in markets with newly minted physician-owned surgeons could leverage different dynamics compared to markets without competitive alternatives. Cost data generated from TEAM would become a comparative analysis tool previously absent in contract negotiations with employers.
For payers, especially those contracting in consolidated markets, the competitive dynamic shifts. The BCBSA’s DOJ letter from May 2025, which supported limited exceptions while explicitly excluding specialized surgical facilities, indicates that payers have already modeled this scenario and are positioning themselves accordingly.
In contrast, the second scenario, favored by the hospital lobby, anticipates limited participation that excludes surgical specialties. The BCBSA’s letter to the DOJ has specifically excluded physician-owned specialized surgical hospitals from proposed exceptions, citing patient selection concerns. The likely outcome would be limited voluntary participation for community hospitals with established rights in rural and under-served markets, leaving specialized orthopedic, spinal, cardiac, and general surgery facilities in the same position as dictated by Section 6001 in 2010.
In this scenario, the demonstration would yield limited comparative data. The market structure question—what physician-owned surgical competition contributes in terms of commercial pricing and episode costs—remains unanswered, as the test population would be too narrow and constrained to generate significant signals. The final rule could cite this demonstration as evidence that the Innovation Center tested the question while the underlying market dynamics remained unchanged.
For health systems, this scenario preserves their dominant surgical market position. The influence on commercial pricing in consolidated markets continues unimpeded. The legislative protections that fostered this position would effectively be reaffirmed.
Many self-funded employers and payers would see the architecture of costs remain unaltered. The tactical tools available to rein in costs—reference-based pricing, direct contracts, and centers of excellence—would function within the same consolidated market structure for which they were originally designed.
Stakeholders Shaping the Outcome
The comment period is not devoid of influence. Organizations heavily invested in the second scenario—including AHA, FAH, and payers contracting with dominant health systems—have legal teams, political staff, and institutional relations capable of producing sophisticated and substantial comment records. The coalition of physicians will submit their comments, yet absent are the voices of employers and payers who genuinely benefit from competition—the perspective essential for a comprehensive discussion.
The final rule will be shaped by the comment submissions. This is not a trivial point. CMS is obligated to respond substantively to the comments, and its regulatory authority is constrained by the records it supports. A comment record dominated by a hospital lobby framework is likely to yield a rule that reflects this framing. Conversely, a record that includes well-documented cost analyses for employers, insights from physicians’ ownership experiences, and arguments about market structure could produce a different outcome.
The window for comments closes on June 9. The final rule is anticipated in August. The ramifications of CMS’s decisions on market structure will soon be evident in commercial contract negotiations, the development of physician ownership, and the cost architecture for employers over the next decade.
This is the crux of the matter. It is not merely a question of payment models; it is fundamentally about market structure. And these decisions are being made right now.
Photo: gustavofrazão, Getty Images
