Physician-Owned Hospitals

Section 1877(d) of the Social Security Act (the Act) sets forth exceptions to the physician self-referral law’s referral and billing prohibitions that are related to ownership or investment interests held by a physician (or an immediate family member of a physician) in an entity that furnishes designated health services.  Section 1877(d)(2) of the Act provides an exception for ownership or investment interests in rural providers (the “rural provider exception”).  To use the rural provider exception, an entity must furnish substantially all of the designated health services that it furnishes to residents of a rural area (as defined in section 1886(d)(2) of the Act).  To satisfy the requirements of the rural provider exception, the designated health services must be furnished in a rural area and, in the case where the entity is a hospital, the hospital must meet the requirements of section 1877(i)(1) of the Act no later than September 23, 2011.  Section 1877(d)(3) of the Act provides an exception for ownership or investment interests in a hospital located outside of Puerto Rico (the “whole hospital exception”).  To satisfy the requirements of the whole hospital exception, the referring physician must be authorized to perform services at the hospital, the ownership or investment interest must be in the hospital itself (and not merely in a subdivision of the hospital), and the hospital must meet the requirements of section 1877(i)(1) of the Act no later than September 23, 2011. These exceptions can be found in our regulations at 42 CFR 411.356(c)(1) and (3), respectively.

Section 6001(a)(3) of the Affordable Care Act amended the rural provider exception and the whole hospital exception to provide that a hospital with physician ownership or investment may not increase the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010 (or, in the case of a hospital that did not have a Medicare provider agreement in effect as of this date, but did have a provider agreement in effect on December 31, 2010, the effective date of such provider agreement). However, the Secretary may grant an exception from the prohibition on facility expansion if a hospital with physician ownership qualifies as an applicable hospital or high Medicaid facility.

Expansion Exception Requests

In the Fiscal Year 2024 Inpatient Prospective Payment System (FY 2024 IPPS) Final Rule (88 FR 58640), effective October 1, 2023, CMS modified and clarified the process for requesting an exception from the prohibition against facility expansion in section 1877(i)(1)(B) of the Act.

Information about the expansion exception request process, its requirements, and detailed instructions for submitting a request can be found in our regulations at 42 CFR 411.363, the preamble to the FY 2024 IPPS Final Rule (88 FR 59293-59294), and the additional information in the Downloads and Related Links below. Requests for exceptions must be submitted by email to POH-ExceptionRequests@cms.hhs.gov.

Expansion Exception Requests Received

• Doctors Hospital at Renaissance, Ltd. (Edinburg, Texas) submitted an exception request (2021 Request). The corresponding decision notice  is published in the Federal Register.
• Solutions Medical Consulting, LLC d/b/a/ Serenity Springs Hospital (Ruston, Louisiana (Lincoln Parish)) submitted an exception request. The corresponding decision notice is published in the Federal Register. 
• St. James Behavioral Health Hospital Inc (Gonzales, Louisiana (Ascension Parish)) submitted an exception request. The corresponding decision notice is published in the Federal Register. 
• Deaconess Women’s Hospital of Southern Indiana d/b/a The Women’s Hospital (Newburgh, Indiana (Warrick County)) submitted an exception request. The corresponding decision notice is published in the Federal Register.
• Texas Health Presbyterian Hospital (Rockwall, Texas) submitted an exception request. The corresponding decision notice is published in the Federal Register.
• Doctors Hospital at Renaissance (Edinburg, Texas) submitted an exception request (2014 Request). The corresponding decision notice is published in the Federal Register.
• Harsha Behavioral Center, Inc. (Terre Haute, Indiana) submitted an exception request. The corresponding decision notice has been published in the Federal Register.
• Lake Pointe Medical Center (Rowlett, TX) submitted an exception request. The corresponding decision notice has been published in the Federal Register.

General Inquiries

If you have general questions regarding hospitals with physician ownership, please send an email to POHInquiries@cms.hhs.gov.

Important Updates:

POH Initial Annual Ownership/Investment Report: Release of CMS-855POH;
No Action Required Until Further Notice

CMS has released the CMS-855POH, a new form approved by the Office of Management and Budget (OMB) to replace Attachment 1 of the CMS-855A (Attachment 1).  POHs previously used Attachment 1 to submit the Initial Annual Ownership/Investment Report required under the physician self-referral law. At this time, POHs should not submit a completed CMS-855POH (or a completed Attachment 1) for purposes of the physician self-referral law reporting requirements until CMS issues further instruction on the Physician Self-Referral website.  As stated in our March 12, 2015 announcement in MLN Connects Provider eNews, CMS has extended the deadline for the POH Initial Annual Ownership/Investment Report due to concerns about the accuracy of the data collected in the report, and POHs should continue to stay tuned to the Physician Self-Referral website (as well as the normal CMS communication channels for notifications related to this issue) for information regarding the revised deadline, specific instructions for submitting the report, and the timeframe during which the report can be submitted.

As a reminder, hospitals that did not file the required information by the earlier deadline of March 3, 2014 may have refrained from filing claims after that date to avoid violating the physician self-referral law’s claim submission prohibition. Because of the deadline extension, submission of those claims may be permissible. Please refer to 42 CFR §424.44 for timely filing guidelines regarding such claims.