1. Limit on grandfathering. To be eligible to operate a hospital and have physician ownership and referrals by such physicians to the hospital, the hospital must have physician ownership as of Jan. 1, 2009, and it must have a Medicare provider agreement in effect as of such date.
This provision provides for essentially no grandfathering for physician-owned hospitals that are under development as of Jan. 1, 2009, but do not yet have a Medicare provider number as of such date.
2. Prohibition on physician ownership investment change. The percentage of total value of the ownership or investment interest held in the hospital by physician owners or investors in the aggregate cannot exceed such percentage ownership as of Jan. 1, 2009. In essence, if physicians owned 10 percent of a hospital as of Jan. 1, 2009, it could not at a later date have more than 10 percent ownership by physicians. The actual physicians can change but the hospital cannot have greater total ownership in the hands of the physicians.
3. Prohibition on expansion of facility capacity. A hospital cannot add operating rooms, procedure rooms or beds anytime on or after the date of enactment of the legislation. In essence, the number of operating rooms, procedure rooms and beds of the hospital at any time on or after the date of enactment of the legislation are no greater than the number of operating rooms, procedures room and beds as of such date.
4. Reporting conflicts of interest. The hospital must submit an annual report with the Department of Health of Human Services identifying each physician owner and physician investor and the nature and extent of all ownership and investment interests. In addition, the hospital must have procedures in place to require that any physician owner or investor disclose to the patient — at the time the patient is referred — the ownership or investment interest and any such ownership or investment interest of the treating physician.
5. No requirement of referrals. The hospital cannot condition any physician ownership or investment interest either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise driving business to the hospital. This type of provision may conflict with certain medical staff bylaws provisions which require a minimum number of cases to be performed by physicians for clinical purposes.
6. Disclosure by hospital. The hospital must disclose the fact that it is partially owned by physicians on any public Web site for the hospital and in any public advertisement for the hospital.
7. Bona fide ownership. There are several requirements with respect to ensuring that ownership in the hospital by the physician owners or investors is bona fide:
- the ownership interest offered to physicians cannot be offered on more favorable terms than the terms offered to a person who is not a physician owner or investor;
- the hospital cannot directly or indirectly provide loans or financing for any physician owner or investor in the hospital;
- the hospital cannot directly or indirectly guarantee a loan, make a payment towards a loan or otherwise subsidize a loan for any individual physician owner or investor group of physician owners or investors that is related to requiring any ownership or investment interest in the hospital;
- ownership or investment returns are distributed to each owner investor in the hospital in an amount that is directly proportionate to the ownership or investment interest of such owner or investor;
- physician owners and investors do not receive, directly or indirectly, any guarantee receipt of or right to purchase other business interests related to the hospital, including the purchase of or lease of any property under the control of other owners or investors in the hospital or located on the premises of the hospital;
- the hospital does not offer a physician owner or investor the opportunity to purchase or lease any property under the control of the hospital or any other owner or investor of the hospital on more favorable terms than the terms offered to an individual who is not a physician owner or investor.
8. Patient safety. The hospital must have the capacity to provide assessments and initial treatment of patients and refer and transfer patients to hospitals with the capacity to treat the needs of the patient.
9. Conversion from ASC. The hospital cannot be converted from an ASC to a hospital on or after the enactment of the date of the legislation.
10. Publication of information reported. The Department of Health and Human Services shall report, on an annual basis, the information submitted by hospitals as required by the legislation (and described earlier) on the public internet site of the Center for Medicare & Medicaid Services.
11. Exceptions to prohibitions on expansion. There is a process for physician-owned hospitals to obtain an exception to the restrictions. However, the exceptions to facility restrictions are very limited and there are a very small number of existing hospitals that might qualify for the potential expansion exceptions.
12. Physician owner or investor defined. For purposes of the legislation, physician owner or investor means a physician (or immediate family member of such physician) with a direct or indirect ownership or investment interest in the hospital.
