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Limitation on Medicare Exception to Prohibition on Physician Referrals

By admin | October 16, 2009

Chairman’s Mark out of the Senate Finance Committee.
The following section is located on page 211. Not finalized as of 10-8-09.

TITLE IV—TRANSPARENCY AND PROGRAM INTEGRITY

Limitation on Medicare Exception to the Prohibition on Certain Physician Referrals for Hospitals

Current Law

Physicians are generally prohibited from referring Medicare patients for certain services to facilities in which they (or their immediate family members) have financial interests. However, among other exceptions, physicians are not prohibited from referring patients to whole hospitals in which they have ownership or investment interests. Providers that furnish substantially all of their designated health services to individuals residing in rural areas are exempt as well.

Chairman’s Mark

Beginning no later than 18 months after the date of enactment, only hospitals meeting certain requirements would be exempt from the prohibition on self-referral. Hospitals that have physician ownership and a provider agreement in operation on November 1, 2009 and that met other specified requirements would be exempt from this self-referral ban. These requirements would address conflict of interest, bona fide investments, and patient safety. In addition, the hospital could not have converted from an ambulatory surgical center to a hospital after the date of enactment.

Specifically, to address conflicts of interest, an exempt hospital would (1) submit an annual report containing the identity of each physician owner and any other information on the nature and extent of all ownership interests in the hospital; (2) have procedures in place to require that any referring physician owner disclose to each patient (by a time that permits the patient to make a meaningful decision regarding the receipt of care) their ownership interest in the hospital and, if applicable, any such ownership interest of the treating physician; (3) not condition ownership, either directly or indirectly, on the physician owners making or influencing referrals to the hospital; and (4) disclose the fact that the hospital is owned in whole or in part by physicians on any public website for the hospital and in public advertising for the hospital. Information from the annual report would be published and updated annually on the Internet website of the Centers for Medicare & Medicaid Services.

Exempt hospitals would ensure bona fide investments and proportional returns by meeting the following requirements: (1) physician owners could not own more than the percentage of the value of physician ownership determined on the date of enactment, or the investment interest in an entity whose assets include the hospital; (2) any ownership interest offered to a physician could not be offered on more favorable terms than those offered to an individual who is not a 209
physician; (3) the hospital could not provide loans or financing for physician investments in the hospital; (4) the hospital could not guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan to any individual physician owner or group of physician owners that is related to acquiring ownership interest in the hospital; (5) investment returns must be distributed to investors in the hospital in an amount that is directly proportional to the capital investment by the hospital investor (as determined in accordance with procedures established by the Secretary); (6) compensation of and investment returns to physician owners must not include the guaranteed receipt of or exclusive right to purchase other business related interests in the hospital, including the purchase or lease of any commercial property under the control of other investors in the hospital or located near the premises of the hospital; and (7) the hospital does not offer a physician owner the opportunity to purchase or lease any property under hospital control on more favorable terms than others.

To ensure patient safety, exempt hospitals would be required to disclose to all patients prior to admission that it does not have any physician available on the premises to provide services during all hours in which the hospital is providing services. Following such a disclosure, the hospital would receive a signed acknowledgement from the patient that no physician will be present. Also the hospital would be required to have the capacity to provide assessment and initial treatment for patients and procedures for the referral and transfer of patients to hospitals with the capability to treat the needs of the patient involved.

Exempt hospitals would not be permitted to increase the number of operating rooms, procedure rooms or beds for which the hospital is licensed after the date of enactment. A procedure room includes a room in which catheterizations, angiographies, angiograms, and endoscopies are performed. A process would be established to allow certain hospitals to expand. Hospitals eligible for expansion would include: (1) a hospital that is located in a county where the population increased during the most recent five year period at a rate that is at least 150 percent of the State‘s population increase; (2) a hospital whose Medicare inpatient admission percentage is equal to or greater than average percentage for all hospitals located in the county; (3) a hospital that does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries; (4) a hospital that is located in a state with a state average bed capacity less than the national average ; and (5) a hospital that has an average bed occupancy rate that is greater than the state average bed occupancy rate. This capacity increase would be limited to facilities on the main campus of the hospital and could not exceed 200 percent of the number of operating rooms, procedure rooms and beds for which the hospital is licensed at the time of enactment. The process for expansion would allow the opportunity for community input and should permit an applicable hospital to apply for the expansion exception up to once every two years. The Secretary would publish final decisions on an expansion no later than 60 days after receiving a complete application. The Secretary would implement this process on May 1, 2011 and would promulgate regulations to carry out this process no later than April 1, 2011. There would be no administrative or judicial review of this process.

The Secretary would be required to establish policies and procedures to ensure compliance with these requirements, beginning on their effective date. The enforcement efforts would be able to include unannounced site reviews of hospitals. These audits should begin no later than August 1, 2011.

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