Ban on Physician-Owned Hospitals About to Become Law After House Vote on Reform

The Senate version of the health reform bill, passed by the House on Sunday and expected to be signed into law by President Obama on Tuesday, will halt new construction and expansion of physician-owned hospitals, according to a statement by the Physician Hospitals of America.

The only aspects of the ban still in flux are a postponement of the start date of the ban until Dec. 31, and the addition of a very narrow window allowing growth of existing hospitals, the PHA said. These changes, part of a reconciliation bill that the House passed after it passed the Senate bill, would not become law unless and until the Senate passes the reconciliation bill.

The Associated Press reported that changing the date would allow about 13 more physician-owned hospitals to be approved, including Mercy Hospital in Monclova, Ohio, Scranton Orthopedic Specialists in Dickson City, Pa., and Paragon Rehabilitation in Goodlettsville, Tenn.

In addition, the PHA stated some gray areas of the final law would not be settled until HHS promulgates regulations based on the law, which will take at least 18 months.

Referring to the ban, PHA Executive Director Molly Sandvig stated: "These provisions are extremely harmful … They virtually destroy many of the hospitals that are currently under development, and leave little room for the future growth of the industry."

However, she added that "committed champions in both parties have told PHA that they will explore all other legislative and regulatory options to mitigate the harm caused by the current language."

The PHA detailed provisions of the bill about to be signed into law.

  1. The current deadline for grandfathering new hospitals is Aug. 1, but the reconciliation package would extend that deadline to Dec. 31.
  2. The aggregate percentage of physician ownership cannot be increased after the bill is signed into law (expected to be March 23).
  3. To expand operations, grandfathered hospitals would have to meet four requirements that the PHA said no physician-owned hospital currently meets. Another growth requirement, that the hospital must be the highest-volume Medicaid provider in the county, which PHA said current hospitals also do not appear to meet at this point, would only become law if the Senate passes the House reconciliation package.
  4. It appears that hospitals that expect to receive initial Medicare certification by the deadline would have until the date of their application to grow and adjust percentages of physician ownership, according to PHA's interpretation.
  5. Additional requirements must be met in order for existing hospitals to be grandfathered, such as disclosure of ownership, disclosure of physician coverage, ability to meet EMTALA standards and other financial disclosure requirements that are already in place.
  6. It is not clear whether hospitals that do not have a Medicare provider number by the deadline would be able to receive Medicare certification at all, but it is clear is that they would not be allowed to treat Medicare or Medicaid patients.

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