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Hospitals With Physician Ownership Eligible for the Whole Hospital Exception Under the Stark Law
Section 6001 of the Patient Protection and Affordable Care Act and Sections 10601 and 1106 of the Health Care and Education Reconciliation Act


Read the statutory language applicable to this section

Reconciliation Bill amendments

Brief analysis

Regulatory status

Bulletins applicable to this section


Application

Hospitals with physician ownership that are eligible for the whole hospital exception must meet the following requirements in order to not violate the Stark Law. A physician owner or investor is defined is a physician (or an immediate family member of such physician) with a direct or an indirect ownership or investment interest in the hospital.

Provider Agreement

The hospital had physician ownership or investment on December 31, 2010; and a provider agreement in effect on that date.

Limitation on Expansion

The number of operating rooms, procedure rooms (defined as rooms in which catheterizations, angiographies, angiograms, and endoscopies are performed, except such term shall not include emergency rooms or departments (exclusive of rooms in which catheterizations, angiographies, angiograms, and endoscopies are performed). and beds for which the hospital is licensed at any time on or after March 23, 2010 is no greater than the number of operating rooms, procedure rooms, and beds for which the hospital is licensed as of such date, except as provided in the next paragraphs. (Note that Ohio does not have a licensure program for hospitals or most hospital beds or procedure rooms.)

The statute mandates that the Secretary of HHS establish and implement a process under which certain hospitals may apply certain expansions and such process must provide individuals and entities in the community in which the applicable hospital applying for an exception is located with the opportunity to provide input with respect to the application. The process is to begin on February 1, 2010 and regulations must be promulgated no later than January 1, 2012.

Hospitals eligible for an exception must meet the following requirements:

  • Be located in a county in which the percentage increase in the population during the most recent 5-year period (as of the date of the application under for the exception is at least 150 percent of the percentage increase in the population growth of the State in which the hospital is located during that period, as estimated by Bureau of the Census;
  • The annual percent of total inpatient admissions that represent Medicaid inpatient admissions is equal to or greater than the average percent with respect to such admissions for all hospitals located in the county in which the hospital is located;
  • Does not discriminate against beneficiaries of federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries;
  • Is located in a State in which the average bed capacity in the State is less than the national average bed capacity; and
  • Has an average bed occupancy rate that is greater than the average bed occupancy rate in the State in which the hospital is located.

Or be a "high Medicaid facility" defined as a hospital that:

  • is not the sole hospital in a county;
  • with respect to each of the 3 most recent years for which data are available, has an annual percent of total inpatient admissions that represent Medicaid inpatient admissions that is estimated to be greater than such percent with respect to such admissions for any other hospital located in the county in which the hospital is located; and
  • does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries.

Hospitals may apply for an exception to the expansion limitation up to once every 2 years.

An applicable hospital granted an exception under the process may increase the number of operating rooms, procedure rooms, and beds for which the hospital is licensed above the baseline number of operating rooms, procedure rooms, and beds of the applicable hospital but no such increase can result in the number of operating rooms, procedure rooms, and beds for which the hospital is licensed exceeding 200 percent of the baseline number of operating rooms, procedure rooms, and beds of the applicable hospital. In this paragraph, the term "baseline number of operating rooms, procedure rooms, and beds" means the number of operating rooms, procedure rooms, and beds for which the applicable hospital is licensed as of March 23, 2010 (or, in the case of a hospital that did not have a provider agreement in effect on March 23, 2010, but does have such an agreement in effect on December 31, 2010, the effective date of such provider agreement);

Any increase in the number of operating rooms, procedure rooms, and beds for which an applicable hospital is licensed pursuant to this paragraph may only occur in facilities on the main campus of the applicable hospital.

Conflicts of Interest

The hospital submits to the Secretary of HHS an annual report containing a detailed description of the identity of each physician owner or investor and any other owners or investors of the hospital; and the nature and extent of all ownership and investment interests in the hospital.

The hospital has procedures in place to require that any referring physician owner or investor discloses to the patient being referred, by a time that permits the patient to make a meaningful decision regarding the receipt of care the ownership or investment interest, as applicable, of such referring physician in the hospital; and if applicable, any such ownership or investment interest of the treating physician.

The hospital does not condition any physician ownership or investment interests either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise generating business for the hospital.

The hospital discloses the fact that the hospital is partially owned or invested in by physicians on any public website for the hospital and in any public advertising for the hospital.

Bona Fide Investments

The percentage of the total value of the ownership or investment interests held in the hospital, or in an entity whose assets include the hospital, by physician owners or investors in the aggregate does not exceed such percentage as of the date of enactment of this subsection.

Any ownership or investment interests that the hospital offers to a physician owner or investor are not offered on more favorable terms than the terms offered to a person who is not a physician owner or investor.

The hospital (or any owner or investor in the hospital) does not directly or indirectly provide loans or financing for any investment in the hospital by a physician owner or investor.

The hospital (or any owner or investor in the hospital) does not directly or indirectly guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan, for any individual physician owner or investor or group of physician owners or investors that is related to acquiring any ownership or investment interest in the hospital.

Ownership or investment returns are distributed to each owner or investor in the hospital in an amount that is directly proportional to the ownership or investment interest of such owner or investor in the hospital.

Physician owners and investors do not receive, directly or indirectly, any guaranteed receipt of or right to purchase other business interests related to the hospital, including the purchase or lease of any property under the control of other owners or investors in the hospital or located near the premises of the hospital.

The hospital does not offer a physician owner or investor the opportunity to purchase or lease any property under the control of the hospital or any other owner or investor in the hospital on more favorable terms than the terms offered to an individual who is not a physician owner or investor.

Patient Safety

Insofar as the hospital admits a patient and does not have any physician available on the premises to provide services during all hours in which the hospital is providing services to such patient, before admitting the patient the hospital discloses such fact to a patient; and following such disclosure, the hospital receives from the patient a signed acknowledgment that the patient understands such fact.

The hospital has the capacity to provide assessment and initial treatment for patients; and refer and transfer patients to hospitals with the capability to treat the needs of the patient involved.

Limitation on Converted Facility

The hospital was not converted from an ambulatory surgical center to a hospital on or after March 23, 2010 .

Audits

Beginning not later than May 1, 2012 the Secretary of HHS is required to conduct audits to determine if hospitals are in compliance with all requirements.


Federal Regulations

Commentary from Final Rule on the Stark Exceptions
On November 30, 2011, CMS published final rules in the Federal Register entitled Hospital Outpatient Prospective Payment; Ambulatory Surgical Center Payment; Hospital Value-Based Purchasing Program; Physician Self-Referral; and Patient Notification Requirements in Provider Agreements. These final rules include a number of provisions to implement various sections of the Affordable Care Act. Among these provisions are implementing regulations for section 6001 describing the process for requesting an exemption from the limitation on increases in operating and procedure rooms and beds. The rule also discusses new requirements for patient notification. The link is an excerpt from the final rule with the text on Section 6001.
Effective Date: January 1, 2012

Commentary from Final Rule on the Stark Exceptions
On November 24, 2010, the Centers for Medicare & Medicaid Services published final rules in the Federal Register entitled Hospital Outpatient Prospective Payment System and CY 2011 Payment Rates etc. These final rules include a number of provisions to implement various sections of the Affordable Care Act. Among these provisions are implementing regulations for section 6001: Hospitals with physician ownership eligible for the whole hospital exception under the Stark Law. The link is an excerpt from the final rule with the text implementing Section 6001.


Bricker & Eckler Bulletins

The Health Care Reform Law Includes Key Stark Law Changes
June 2010
Bulletin on new Stark law self-disclosure protocol, restrictions on physician-owned hospitals, and requirements for transparency in physician-owned imaging services contained in the health care reform law.

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