NEWMARK KNIGHT FRANK

Physician-Owned Hospitals Debate Revived by House Bill

Jeff Lagasse, Associate Editor | Healthcare Finance

If adopted, the bill would repeal sections of the ACA that, since 2011, prevented new physician-owned hospitals from participating in Medicare.

Shortly after Valentine's Day, Representative Sam Johnson, R-Texas, introduced a bill to the House of Representatives that put a spotlight on a contentious debate regarding the propriety of physician-owned hospitals. If adopted, the Patient Access to Higher Quality Health Care Act of 2017 would repeal sections of the Affordable Care Act that, since 2011, have effectively prevented new physician-owned hospitals from participating in the Medicare program.

Prior to the ACA, the "whole hospital" exception to the federal physician self-referral law known as the "Stark Law" permitted, under certain conditions, a physician to have an ownership or investment interest in a hospital to which the physician refers "designated health services" that are covered by the Medicare program. Specifically, physicians could refer patients to hospitals in which they had an ownership interest so long as the ownership interest related to the entire hospital facility as opposed to a hospital department.

Section 6001 of the ACA amended the whole hospital exception to prohibit the exception's applicability to new physician-owned hospitals -- in general terms, physician-owned hospitals that did not have Medicare provider agreements in effect as of Dec. 31, 2010.

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