Expansion hurdles high for doc-owned hospitals
The CMS has proposed a process to allow physician-owned hospitals to expand despite the healthcare reform law’s stifling of them, but few such hospitals will be able to climb through that window, according to a lawyer who represents physician-owned hospitals.
Section 6001 of the Patient Protection and Affordable Care Act banned new physicianowned hospitals and froze the size and physician ownership percentages of those already in place. Section 6001 also required the CMS to set up a process for physicianowned hospitals to apply for an exception to the law’s freezing of their size. The CMS included the regulation setting up this process in the outpatient prospective payment system rule proposed July 1 for hospitals and ambulatory surgery centers.
Roger Strode, a lawyer with McDermott Will & Emery who represents several physicianowned hospitals, said the process as outlined in the proposed rule contains no big surprises. “There are probably only a handful of these hospitals that could apply for and receive the approval to expand, given the conditions that the CMS has put on this,” Strode said.
For one, physician-owned hospitals have to show that the population of the county in which they are located is growing rapidly relative to the state’s population, Strode said. The hospitals also have to show that the area is under-bedded or lacks needed operating rooms, he added. Another way to qualify is through the percentage of patients who are covered by Medicaid, but few physicianowned hospitals have a high enough Medicaid patient level to qualify, he said.
Rather than looking to expand, Strode said, most physician-owned hospitals would be better off looking to meet their needs under a CMS ruling in November that provided some flexibility. Section 6001 froze capacity of existing physician-owned hospitals as of the date of the act’s passage, March 23, 2010, but the November ruling said the total number of beds, operating rooms and procedure rooms is what must remain unchanged; the numbers devoted to the individual categories can change as long as the total doesn’t increase (Nov. 15, 2010, p. 12).
“That was a favorable ruling, much more so than this one,” Strode said.
The Physician Hospitals of America is still reviewing the proposed rule, according to spokeswoman Leslie Fossey. “We believe that the real answer is to repeal Section 6001,” Fossey said. “That’s our goal, and that’s been