Con­di­tional growth

Ex­pan­sion hur­dles high for doc-owned hos­pi­tals

Modern Healthcare - - The Week In Healthcare - Vince Gal­loro

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

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