Physician Owned Hospital Expansion – CMS Approval Process
Obtaining Approval for Expansion of Physician Owned Hospitals
Currently, federal law effectively prohibits the establishment of new physician-owned hospitals. Expansion of existing physician-owned hospitals is also effectively prohibited. An existing hospital may request an exception from the prohibition from the Center for Medicare and Medicaid Services. An exemption may be granted by CMS, but not without the hospital going through the formal request and review process.
Under the federal Stark Law, physicians are prohibited from owning interests or having financial relationships with entities that provide “designated health services,” including hospital services, unless an exception exists. Previous versions of the Stark Law contained an exception for investments in the hospital itself as opposed to a subdivision of the hospital (known as the “whole hospital” exception. The Affordable Care Act virtually eliminated the “whole hospital” exception from the Stark Law for future hospital projects and for expansion of existing projects.
Beginning in March of 2010, a physician-owned hospital is prohibited from expanding existing capacity unless it applies for and is granted an exception as either an “applicable hospital” or a “high Medicaid facility.” Federal regulations set forth the procedures that must be complied with when submitting requests for an exception.
Physician-owned hospitals that wish to expand existing capacity must follow the regulatory process for obtaining approval. Part of this process involves CMS obtaining input from other providers in the community. Even if expansion is approved, expansion cannot exceed 200% of the baseline number of operating norms, procedure rooms, and beds. Expansion must be limited to the hospital’s primary campus.
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Tags: Expansion of Hospital, Physician-Owned Hospitals, Stark Law