The most consequential healthcare market structure question of the next decade is currently sitting in a federal comment docket that closes June 9. Almost no one outside the physician lobby and the hospital trade associations knows it is there.
On April 10, 2026, CMS released CMS-1849-P, the FY2027 Inpatient Prospective Payment System proposed rule. Inside it is a Request for Information asking whether physician-owned hospitals should be allowed to voluntarily participate in the Transforming Episode Accountability Model – and whether CMS Innovation Center authority under Section 1115A can waive specific provisions of Section 6001 of the ACA to make that possible. The final rule is expected in August.
This is not a payment model story. TEAM is the vehicle. The question underneath it is whether a fifteen-year legislative protection that eliminated physician-owned surgical competition from the American healthcare market can be administratively unwound through demonstration authority. That question has direct implications for health system market position, physician entrepreneurship architecture, employer cost trajectory, and payer strategy – and it will be answered, one way or another, before most healthcare executives have finished reading this article.
The architecture that is being questioned
Section 6001 of the Affordable Care Act froze physician-owned hospitals out of Medicare participation in 2010. The AHA and FAH lobbied it into law. The stated justification was patient cherry-picking. The structural outcome was the elimination of a competitive category that threatened dominant health system market position in high-margin surgical procedures.
The cherry-picking argument has since been tested. A 2023 study commissioned by the Physicians Advocacy Institute and The Physicians Foundation analyzed 650,386 Medicare discharges across 186 physician-owned hospitals and found patient demographics and comorbidity levels statistically similar between physician-owned and traditional hospitals in the same referral regions. Medicare savings of 8.6% to 15.2% on the 20 most expensive conditions – projecting to approximately $1.1 billion in annual savings – were the headline finding.
The counter-study exists. Dobson DaVanzo, commissioned by FAH in 2023, found physician-owned hospitals treat younger, less complex, less likely to be dual-eligible patients and carry lower uncompensated care costs. Both studies will be cited in the comment docket. What neither study resolves is the market structure question: what does the absence of physician-owned surgical competition produce in commercial pricing, and what does its return produce?
The consolidation that followed Section 6001 produced a documented market trajectory. By 2024, nearly 80% of all physicians were affiliated with hospitals, health systems, or other corporate entities. Health system commercial pricing power in consolidated markets increased materially over the same period. The causal chain is not simple – consolidation had multiple drivers – but the removal of physician-owned surgical competition accelerated a market concentration dynamic that is now the central cost problem for self-funded employers and an active enforcement priority for federal regulators. The DOJ Antitrust Division’s Health Care Monopolies and Collusion Task Force is actively examining healthcare market concentration. BCBSA submitted its May 2025 letter to that task force specifically – signaling that the payer community has already connected the physician-owned hospital question to the antitrust enforcement environment. CMS’s RFI lands inside that context, not outside it.
What the RFI Is actually testing
TEAM is a five-year mandatory bundled payment model covering coronary artery bypass graft, lower extremity joint replacement, major bowel procedure, surgical hip and femur fracture treatment, and spinal fusion. Approximately fifteen physician-owned hospitals are already mandated into TEAM based on their geographic markets. The RFI asks whether to extend voluntary opt-in beyond those markets and whether operational waivers – bed counts, operating room caps, service line restrictions – are broad enough for physician-owned hospitals to actually scale participation.
The Innovation Center’s Section 1115A authority was designed to test payment and delivery alternatives that Medicare statute would otherwise prohibit. CMS is asking whether that authority reaches Section 6001 specifically. If the demonstration is designed broadly, CMS generates real comparative data on episode cost and quality that either validates or refutes the efficiency argument at scale. If it is designed narrowly – grandfathered facilities only, surgical-specialty hospitals excluded, operational waivers limited – the data is thin, the question goes unanswered, and the legislative status quo is effectively ratified for another regulatory cycle.
Scenario one: Broad opt-in with meaningful waivers
If CMS grants broad opt-in with operational waivers that allow physician-owned surgical hospitals to scale participation, the market implications run across every stakeholder category.
For health systems, particularly those that have built dominant market position in orthopedic, spine, cardiac, and general surgery, this scenario introduces the first meaningful competitive threat to surgical pricing in fifteen years. The competitive pressure is not immediate – building and scaling physician-owned surgical facilities takes capital and time – but the market signal changes. Commercial contract negotiations in markets with viable physician-owned alternatives look different than in markets without them.
For physicians, broad opt-in reopens an ownership architecture that has been closed since 2010. The capital requirements for a surgical-specialty physician-owned hospital are significant, but the structural option exists again. For the physician groups and entrepreneurial physicians who have been building toward ownership models outside employment, this scenario changes the investment and development calculus materially.
For self-funded employers, broad opt-in creates a medium-term planning signal. Direct contracting and center-of-excellence strategies in markets with new physician-owned surgical entrants carry different leverage than in markets with no competitive alternatives. The episode cost data TEAM generates becomes a benchmarking tool that did not previously exist for employer contract negotiations.
For payers, particularly those contracting in consolidated markets, the competitive dynamic shifts. BCBSA’s May 2025 DOJ letter – which supported limited exceptions but explicitly excluded surgical-specialty facilities – signals that payers have already modeled this scenario and are positioning accordingly.
Scenario two: Narrow opt-in with surgical-specialty exclusion
This is the scenario the hospital lobby is building toward. The BCBSA letter to the DOJ Antitrust Division (Docket ATR-2025-0001, May 27, 2025) explicitly excluded surgical-specialty physician-owned hospitals from proposed exceptions, citing patient selection concerns. AHA and FAH will build on that framing in their comment filings. The likely construct is opt-in limited to grandfathered community hospitals in rural and underserved markets – leaving orthopedic, spine, cardiac, and general surgery specialty facilities exactly where Section 6001 left them in 2010.
In this scenario, the demonstration produces limited comparative data. The market structure question – what does physician-owned surgical competition produce in commercial pricing and episode cost – goes unanswered because the test population is too narrow and too constrained to generate meaningful signal. The final rule cites the demonstration as evidence that the Innovation Center tested the question, while the underlying market dynamics remain unchanged.
For health systems, this scenario is the preferred outcome. Dominant surgical market position is preserved. Commercial pricing leverage in consolidated markets continues. The legislative protection that produced that position is effectively ratified.
For physicians considering ownership outside employment, this scenario changes nothing. The structural options available in 2026 look identical to those available in 2010. Direct care models – DPC, Concierge, Direct Specialty Care – remain the primary viable exit from employment for physicians who want ownership without a health system intermediary.
For employers and payers, the cost architecture challenge is unchanged. The tactical tools available for cost containment – reference-based pricing, direct contracting, centers of excellence – continue operating inside the same consolidated market structure they were designed to work around.
Who shapes the outcome
The comment docket is not neutral. The organizations with the most at stake in scenario two – AHA, FAH, and the payers that contract with dominant health systems – have legal teams, policy staff, and institutional relationships that produce sophisticated, voluminous filings. The physician coalition will file. The employer voice, the payer voice that actually benefits from competition, and the market-facing perspective that neither trade association represents are the gaps in the current comment trajectory.
The final rule will reflect the comment record. That is not a platitude. CMS must respond to substantive comments and its rulemaking authority is constrained by what the record supports. A comment docket dominated by hospital lobby framing produces a rule that reflects that framing. A comment docket that includes documented employer cost analysis, physician ownership experience, and market structure argument produces a different rule.
The window closes June 9. The final rule publishes in August. The market structure implications of what CMS decides will be visible in commercial contract negotiations, physician ownership development, and employer cost architecture for the next decade.
That is the question in the docket. It is not a payment model question. It is a market structure question. And it is being decided right now.
Photo: gustavofrazao, Getty Images
Dana Y. Lujan, MBA, CHFP, CRCR, is founder of Wellthlinks, a healthcare advisory firm that connects providers and employers to design compliant, innovative care models. With more than 20 years of experience in healthcare operations, contracting, and compliance, she has advised health systems, physician groups, and employers on strategies ranging from value-based contracting to direct primary care adoption. Her thought leadership has been published on KevinMD and Medium, where she writes on innovation, compliance, and employer health strategies. She is passionate about building sustainable models that improve access, reduce costs, and strengthen trust between employers, providers, and employees.
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