PPACA & the Whole Hospital Exception

November 3, 2010, 9:41 AM

The Patient Protection and Affordable Care Act (PPACA) amended the Stark Law by modifying the hospital ownership (whole hospital) exception, codified at 42 U.S.C. 1395nn(d)(3). The whole hospital exception allows physicians to refer Designated Health Services (DHS) for Medicare or Medicaid patients to hospitals owned by the referring physician or an immediate family member of the referring physician. The referring physician has to have an ownership in the entire hospital, not just in a distinct department of the hospital. This exception will now only apply to hospitals in which the physician had an ownership or investment interest on December 31, 2010 (Grandfathered physician-owned hospitals). In other words, no new physician-owned hospitals will be permitted after December 31, 2010.

Grandfathered physician-owned hospitals, however, will be subject to substantial restrictions under the PPACA. These restrictions include the following: a prohibition on increasing total physician ownership percentages, increasing the number of beds, operating rooms or procedure rooms. A process has been established under the PPACA whereby a grandfathered physician-owned hospital can seek an exception to these facility restrictions.

Additionally, grandfathered hospitals will have to have procedures in place whereby the referring physician-owners will have to disclose their ownership interests to their patients within a reasonable time. Grandfathered hospitals will also be required to file annual reports with the Secretary of Health and Human Services identifying the physician and non-physician owners. Lastly, these grandfathered hospitals will have to publically disclose the fact the hospital is partially physician owned via any public website of the hospital and in any of the hospitals public advertising.

Recap: Grandfathered physician-owned hospitals must have a provider agreement in place on or before December 31, 2010, and a hospital with no physician ownership as of March 23, 2010 will not qualify for the whole hospital Stark exception. -Katie G. Davenport