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Understanding the “whole hospital exception” to the Stark laws

By Dr. David Edward Marcinko MBA CMP®


Dr. David E. Marcinko MBAThis was a big week for healthcare reform, wasn’t it? Some provisions of the PP-ACA requiring the employer mandates were delayed another year; until January 1, 2015.

But, before passage of the ACA in 2010, the “whole hospital exception” to the Stark law allowed physicians to have an ownership interest in a hospital to which those physicians refer patients, provided the physician is invested in the whole hospital and not a subdivision of the hospital, with no limitations as to the amount or extent of physician ownership, on either an aggregate or individual basis.


Now, according to colleague Robert James Cimasi MHA, AVA, ASA, MCBA, CMP®, of www.HealthCapital.com, The ACA completely prohibits physician-owned hospitals which were not Medicare-certified by December 31, 2010.

[1] The ACA allows hospitals with a provider agreement prior to December 31, 2010 to continue Medicare participation if they meet the following four criteria: (1) located in a county with a population growth rate of at least150% the state’s population growth over the last 5 years; (2) have Medicaid inpatient admission percentage of at least the average of all hospitals in the county; (3) located in a state with below-national-average bed capacity; and, (4) have bed occupancy rate greater than state average. [2]


A very limited number of physician-owned hospital existing in 2010 met or were close to meeting all 4 of criteria.[3] The Reconciliation Act provided a limited exception to the ACA growth restrictions for grandfathered physician owned hospitals that treat the highest percentage of Medicaid patients in their county (and are not the sole hospital in a county).[4]


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Based on these provisions, the 2010 healthcare reform legislation will likely have a considerable negative impact on physician-owned hospitals, in terms of impeding development of new hospitals and expansion of existing hospitals.


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[1]       “Section-by-Section Analysis with Changes Made by Title X and Reconciliation included within Titles I-IX,” Democratic Policy Committee, http://dpc.senate.gov/healthreformbill/healthbill96.pdf (Accessed 5/24/2010).

[2]       “Section-by-Section Analysis with Changes Made by Title X and Reconciliation included within Titles I-IX,” Democratic Policy Committee, http://dpc.senate.gov/healthreformbill/healthbill96.pdf (Accessed 5/24/2010).

[3]       “Healthcare Reform: A Brief Analysis on How it Impacts ASCs and Physician-OwnedHospitals – 10 Observations”, By Scott Becker, Leigh Page, and Rob Kurtz, Becker’s Hospital Review, http://www.beckersorthopedicandspine.com/news-a-analysis/legal-a-regulatory/1193-healthcare-reform-abrief- analysis-on-how-it-impacts-ascs-and-physician-owned-hospitals-10-observations (Accessed 5/20/10).

[4]       “Section-by-Section Analysis with Changes Made by Title X and Reconciliation included within Titles I-IX,” Democratic Policy Committee, http://dpc.senate.gov/healthreformbill/healthbill96.pdf (Accessed 5/24/2010).

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2 Responses

  1. Physician-Owned Hospitals Forced To Plead Their Case

    According to R. Blake Curd MD, these facilities, which for the most part, specialize in heart and orthopedic surgeries, are winners in health reform provisions that reward hospitals for quality. But, only for now.


    The Affordable Care Act prohibits the construction of new doctor-owned hospitals if those institutions want to accept Medicare or Medicaid patients.

    Dr. Spivey


  2. Most Common Question Categories Public Would Like Answered About ACA If They Have One Question Answered

    1. Questions about cost / How much will I have to pay / How is the law paid for? – 19%
    2. Need a general summary, what is it and what will it do / How does it work? – 18%
    3. How will the law make the health care system better / Who benefits (most)? – 7%
    4. What impact will it have on groups (uninsured, young, undocumented, seniors) – 6%
    5. How will it impact me/my family? – 5%
    6. Questions about benefits, coverage, or available plans – 5%
    7. How will the law impact my current insurance arrangements? – 4%

    Source: Kaiser Family Foundation


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