Ex­ist­ing doc-owned hos­pi­tals get break in new rule

Modern Healthcare - - Front Page - Andis Robeznieks

Doc-own­ers get a lit­tle

breath­ing room

Re­stric­tions on physi­cian hos­pi­tal own­er­ship con­tained in the health­care re­form law are be­ing im­ple­mented by the CMS and, while doc­tors who wish to in­vest in new fa­cil­i­ties have an up­hill bat­tle, those with own­er­ship stakes in ex­ist­ing fa­cil­i­ties were given a lit­tle room to breathe.

In ad­di­tion to the main im­ple­men­ta­tion sto­ry­line, there are two side dra­mas in the on­go­ing saga over physi­cian-owned hos­pi­tals. There is a push by Sen. Dianne Fe­in­stein (D-Calif.) to al­low a nearly com­pleted $211 mil­lion fa­cil­ity in Mur­ri­eta, Calif., to go for­ward as a joint ven­ture be­tween physi­cians and the Loma Linda (Calif.) Uni­ver­sity Med­i­cal Cen­ter when con­struc­tion fin­ishes next March, and a fed­eral ex­am­ple, can be added if the same num­ber of pro­ce­dure rooms or beds are elim­i­nated.

“That’s not flex­i­bil­ity that was ob­vi­ous in the statute,” said at­tor­ney Michael Lam­pert, a Bos­ton-based as­so­ci­ate in the health­care group of law firm Ropes & Gray, adding that, if there was one sur­prise, it was that the CMS could have is­sued more re­stric­tions but didn’t.

“CMS hasn’t gone be­yond the lim­its that the statute has set forth,” Lam­pert said. He added, how­ever, that the pro­hi­bi­tion on in­creas­ing the num­ber of physi­cian-owned hos­pi­tals or ex­pand­ing their ca­pac­ity “is es­sen­tially im­ple­mented,” and “the real losers are the hos­pi­tals that were in devel­op­ment and had deals un­der way in 2010.”

The fi­nal im­ple­men­ta­tion piece, Lam­pert fa­cil­ity as long as the new fa­cil­ity has fewer or the same ag­gre­gate num­ber of op­er­at­ing rooms, pro­ce­dure rooms and beds than the old fa­cil­ity had on March 23.

Physi­cian are also free to sell their own­er­ship stakes, though the per­cent­age of physi­cian own­er­ship in a hos­pi­tal or “in an en­tity whose as­sets in­clude the hos­pi­tal” is not al­lowed to go higher than it was on March 23.

There is a pro­vi­sion that may up­set a stan­dard busi­ness agree­ment be­tween physi­cian in­vestors. Of­ten, physi­cians will be re­quired to sell their own­er­ship stake if they re­tire or move and no longer prac­tice in the com­mu­nity where the hos­pi­tal is lo­cated. Ac­cord­ing to the rule, hos­pi­tals are pro­hib­ited “from con­di­tion­ing any physi­cian own­er­ship or in­vest­ment in­ter­est ei­ther di­rectly or in­di­rectly on the physi­cian’s abil­ity to make or in­flu­ence re­fer­rals to the hos­pi­tal.”

Since the rule fol­lowed ba­sic ex­pec­ta­tions, it didn’t gen­er­ate a strong re­ac­tion from the Amer­i­can Hos­pi­tal As­so­ci­a­tion.

Of course, it could all be moot point if the re­form law is de­clared un­con­sti­tu­tional as a re­sult of the law­suit brought by the Physi­cian Hos­pi­tals of Amer­i­can ad­vo­cacy or­ga­ni­za­tion and the Texas Spine & Joint Hos­pi­tal, Tyler, Texas, whose $27 mil­lion ex­pan­sion was stopped when the Pa­tient Pro­tec­tion and Af­ford­able Care Act was signed into law.

The trial is ten­ta­tively set to start Dec. 9, though it could be over be­fore it be­gins if U.S. District Judge Michael Schneider agrees with the Jus­tice Depart­ment’s mo­tion for a judg­ment on whether the suit should even be brought to trial.

Ac­cord­ing to Molly Sand­vig, ex­ec­u­tive di­rec­tor of the PHA, there are at least 269 Medi­care-cer­ti­fied, physi­cian-owned hos­pi­tals, and there are about 15 that have opened and ap­plied for cer­ti­fi­ca­tion plus five more that plan to open be­fore Dec. 31.

Then there’s Loma Linda Uni­ver­sity Med­i­cal Cen­ter-Muri­etta, which plans to open next March as a joint ven­ture be­tween Loma Linda and a group of physi­cians who would have 45% own­er­ship in the fa­cil­ity. Fe­in­stein has been push­ing to let the hos­pi­tal, which be­gan con­struc­tion in 2008, open un­der the cur­rent own­er­ship struc­ture.

Sand­vig said that al­though physi­cianowned hos­pi­tals have bi­par­ti­san con­gres­sional sup­port, they are of­ten por­trayed as hav­ing mostly Repub­li­can spon­sors. She said that is a prod­uct of most physi­cian-owned hos­pi­tals be­ing lo­cated in states with GOP rep­re­sen­ta­tion. But she added that Fe­in­stein has been very help­ful and sup­port­ing of the Loma Linda project and oth­ers in Cal­i­for­nia.

—with Jes­sica Zig­mond

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