Senate Supplemental Appropriations Bill Would Ban New Physician-Owned Hospitals

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Written by Stephanie Wasek

Tuesday, 20 May 2008

New physician-owned hospitals would be banned under language added to the Senate version of the Supplemental Appropriations Bill. Over the past several months, the House of Representatives has consistently added language to bills that would prohibit physician ownership of hospitals. Up until now, the Senate counterpart bills have not included similar prohibitions; now, the appropriations bill passed by the Senate has similar restrictions to the House bills. A lot can happen between here and actual law, but now that the Senate has finalized anti-physician-ownership language in legislation, this is a very ominous development.

The language also contains a few important exceptions made primarily due to amendments offered by Sen. Ben Nelson (D-Neb.) and Sen. Herb Kohl (D-Wis.). The amendments mostly affect existing facilities; there are nine major provisions:

1. The cap on the allowed increase in beds/rooms is 100 percent over the lifetime of the hospital, allowing it to up to double in size.

2. A hospital must be located in a county with a five-year average growth rate of at least 150 percent of that for the state it is in.

3. Occupancy rate of the physician-owned hospital must be greater than the average bed occupancy of the state.

4. Emergency rooms or departments won't count against growth in number of rooms, so hospitals could add ERs without submitting an application to HHS.

5. The HHS secretary shall publish decisions on applications for growth within 60 days of the submission of a completed application.

6. There is no restriction on individual physician ownership; it was previously to be capped at 2 percent per physician.

7. Aggregate physician ownership may be the greater of 40 percent or the percentage of ownership as of the date of the bill's enactment; this was previously capped at 40 percent for all physicians

8. The annual percentage of total inpatient Medicaid visits must be equal to or greater than the average for all hospitals in the country.

9. Sept. 1 would be the deadline for under-development hospitals to receive their Medicare numbers in order to be grandfathered.

An analysis of eligibility for permission to grow was performed. Based on the requirement that a hospital be in a state with an average bed capacity below the U.S. average (2.7 beds per 1,000 population), 26 states plus the District of Columbia do not qualify

"Some of the big physician-hospital states, like Kansas, Louisiana, Oklahoma and South Dakota, will not be able to grow on this definition alone," says Molly Sandvig, JD, executive director of Physician Hospitals of America.

Twenty-four states fall below the U.S. average: Alaska, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Maryland, Massachusetts, Michigan, Nevada, New Mexico, New Hampshire, New Jersey, North Carolina, Oregon, Rhode Island, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.

It is estimated that the proposed restrictions on physician-owned hospitals would save the federal government $1.3 billion over 10 years.

"It is anticipated that the Senate language will be adopted by the House and that the completed bill will move forward to the president prior to Memorial Day weekend," says Ms. Sandvig. "The president has stated that he will veto the bill as it stands due to a number of domestic spending issues. Needless to say, we have been and will be working toward obtaining a presidential statement of support over the next two weeks."

To learn about how you can help, visit PHA online.