[Federal Register Volume 79, Number 211 (Friday, October 31, 2014)]
[Notices]
[Pages 64801-64802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25940]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1615-FN]


Medicare Program; Approval of Request for an Exception to the 
Prohibition on Expansion of Facility Capacity Under the Hospital 
Ownership and Rural Provider Exceptions to the Physician Self-Referral 
Prohibition

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final notice.

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SUMMARY: This final notice announces our decision to approve the 
request from Lake Pointe Medical Center for an exception to the 
prohibition against expansion of facility capacity.

DATES: Effective Date: This notice is effective on October 31, 2014.

FOR FURTHER INFORMATION CONTACT:  Patricia Taft, (410) 786-4561 or 
Teresa Walden, (410) 786-3755.

SUPPLEMENTARY INFORMATION: 

I. Background

    Unless the requirements of an applicable exception are satisfied, 
section 1877 of the Social Security Act (the Act), also known as the 
physician self-referral law--(1) prohibits a physician from making 
referrals for certain ``designated health services'' (DHS) payable by 
Medicare to an entity with which he or she (or an immediate family 
member) has a financial relationship (ownership or compensation); and 
(2) prohibits the entity from filing claims with Medicare (or billing 
any individual, third party payer, or other entity) for those DHS 
furnished as a result of a prohibited referral. Section 1877(d)(3) of 
the Act provides an exception, known as the ``whole hospital 
exception,'' for physician ownership or investment interests held in a 
hospital located outside of Puerto Rico, provided that the referring 
physician is authorized to perform services at the hospital and the 
ownership or investment interest is in the hospital itself (and not 
merely in a subdivision of the hospital). Section 1877(d)(2) of the Act 
provides an exception for physician ownership or investment interests 
in rural providers (the ``rural provider exception''). In order for an 
entity to qualify for the rural provider exception, the DHS must be 
furnished in a rural area (as defined in section 1886(d)(2) of the Act) 
and substantially all the DHS furnished by the entity must be furnished 
to individuals residing in a rural area.
    Section 6001(a)(3) of the Patient Protection and Affordable Care 
Act (Pub. L. 111-148) as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) (hereafter referred to 
together as ``the Affordable Care Act'') amended the whole hospital and 
rural provider exceptions to the physician self-referral prohibition to 
impose additional restrictions on physician ownership and investment in 
hospitals and rural providers. Since March 23, 2010, a physician-owned 
hospital that seeks to avail itself of either exception is prohibited 
from expanding facility capacity unless it qualifies as an ``applicable 
hospital'' or ``high Medicaid facility'' (as defined in sections 
1877(i)(3)(E), (F) of the Act and 42 CFR 411.362(c)(2), (3) of our 
regulations) and has been granted an exception to the facility 
expansion prohibition by the Secretary. Section 1877(i)(3)(A)(ii) of 
the Act provides that individuals and entities in the community in 
which the provider requesting the exception is located must have an 
opportunity to provide input with respect to the provider's application 
for the exception. Section 1877(i)(3)(H) of the Act states that the 
Secretary shall publish in the Federal Register the final decision with 
respect to an application for an exception to the prohibition against 
facility expansion not later than 60 days after receiving a complete 
application.
    For further information on the physician-owned hospital expansion 
exception process, visit our Web site at: http://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Physician_Owned_Hospitals.html.

II. Exception Approval Process

    On November 30, 2011, we published a final rule in the Federal 
Register (76 FR 74122, 74517 through 74525) that, among other things, 
finalized Sec.  411.362(c), which specified the process for submitting, 
commenting on, and reviewing a request for an exception to the 
prohibition on expansion of facility capacity. We specified that prior 
to our review of the request, we will solicit community input on the 
request for an exception by publishing a notice of the request in the 
Federal Register (see Sec.  411.362(c)(5)). We also stated that 
individuals and entities in the hospital's community have 30 days to 
submit comments on the request. Community input must take the form of 
written comments and may include documentation demonstrating that the 
physician-owned hospital requesting the exception does or does not 
qualify as an ``applicable hospital'' or ``high Medicaid facility,'' as 
such terms are defined in Sec.  411.362(c)(2) and (3). Although we gave 
examples of community input, such as documentation demonstrating that 
the hospital does not satisfy one or more of the data criteria or that 
the hospital discriminates against beneficiaries of Federal health care 
programs, we noted that these were examples only and that we would not 
restrict the type of community input that may be submitted (76 FR 
74522). If we receive timely comments from the community, we will 
notify the hospital, and the hospital has 30 days after such notice to 
submit a rebuttal statement (Sec.  411.362(c)(5)(ii)).
    A request for an exception to the facility expansion prohibition is 
considered complete and ready for CMS review if no comments from the 
community are received by the close of the 30-day comment period. If we 
receive timely comments from the community, we consider the request to 
be complete 30 days after the hospital is notified of the comments. If 
we grant the request for an exception to the prohibition on expansion 
of facility

[[Page 64802]]

capacity, the expansion may occur only in facilities on the hospital's 
main campus and may not result in the number of operating rooms, 
procedure rooms, and beds for which the hospital is licensed exceeding 
200 percent of the hospital's baseline number of operating rooms, 
procedure rooms, and beds (Sec.  411.362(c)(6)). Our decision to grant 
or deny a hospital's request for an exception to the prohibition on 
expansion of facility capacity will be published in the Federal 
Register in accordance with our regulations at Sec.  411.362(c)(7).

III. Public Response to Notice With Comment Period

    On May 12, 2014, we published a notice in the Federal Register (79 
FR 26969) entitled, Request for an Exception to the Prohibition on 
Expansion of Facility Capacity under the Hospital Ownership and Rural 
Provider Exceptions to the Physician Self-Referral Prohibition. In the 
May 12, 2014 notice we stated that as permitted by section 1877(i)(3) 
of the Act and our regulations at Sec.  411.362(c), the following 
physician-owned hospital requested an exception to the prohibition on 
expansion of facility capacity:
    Name of Facility: Lake Pointe Medical Center.
    Location: 6800 Scenic Drive, Rowlett, Texas 75088-4552 (Rockwall 
County).
    Basis for Exception Request: High Medicaid Facility.
    In the May 12, 2014 notice we also solicited comments from 
individuals and entities in the community in which Lake Pointe Medical 
Center is located. Eighty-four comments were submitted under docket 
number for the notice (CMS-2014-0061). Eighty-three of those comments 
advocated that a different physician-owned hospital in another county 
be allowed to expand under the expansion exception process. Those 
comments were not relevant to the Lake Pointe Medical Center request, 
and we have not considered them in deciding the request. The only 
remaining comment urged CMS to evaluate whether Lake Pointe Medical 
Center is a ``high Medicaid facility'' using data that our regulations 
do not permit us to consider.
    On August 4, 2014, as required by Sec.  411.362(c)(5)(ii), we 
notified Lake Pointe Medical Center that we received comments in 
response to the May 12, 2014 notice and that these comments were 
available for public viewing at http://www.regulations.gov. Lake Pointe 
Medical Center submitted a rebuttal statement on August 13, 2014. The 
statement indicated that the comments raised no issues of law or fact 
that in any way contradict Lake Pointe Medical Center's assertion that 
it meets all of the statutory and regulatory requirements to qualify as 
a high Medicaid facility. On September 3, 2014, at the close of the 30-
day rebuttal period, CMS deemed the request complete pursuant to Sec.  
411.362(c)(5)(ii).

IV. Decision

    This final notice announces our decision to approve the request 
from Lake Pointe Medical Center for an exception to the prohibition 
against expansion of facility capacity. As set forth in our current 
regulations and public guidance documents, Lake Pointe Medical Center 
submitted the data and certifications necessary to demonstrate that it 
satisfies the criteria to qualify as a high Medicaid facility. Further, 
our regulations do not permit us to consider the data recommended by 
the one relevant comment. Therefore, in accordance with section 
1877(i)(3) of the Act, we have granted the request from Lake Pointe 
Medical Center for an exception to the expansion of facility capacity 
prohibition based on the following criteria:
     The hospital is not the sole hospital in Rockwall, Texas, 
the county in which it is located;
     The hospital certified that it does not discriminate 
against beneficiaries of Federal health care programs and does not 
permit physicians practicing at the hospital to discriminate against 
such beneficiaries; and
     With respect to each of the 3 most recent fiscal years for 
which data were available as of the date the hospital submitted its 
request, the hospital has an annual percent of total inpatient 
admissions under Medicaid that is estimated to be greater than such 
percent with respect to such admissions for any other hospital located 
in Rockwall County, Texas, the county in which the hospital is located.
    Our approval grants the request of Lake Pointe Medical Center to 
add a total of 36 beds. Pursuant to Sec.  411.362(c)(6), the expansion 
may occur only in facilities on the hospital's main campus and may not 
result in the number of operating rooms, procedure rooms, and beds for 
which the hospital is licensed exceeding 200 percent of the hospital's 
baseline number of operating rooms, procedure rooms, and beds. Lake 
Pointe Medical Center certified that its baseline number of operating 
rooms, procedure rooms, and beds for which it was licensed as of March 
23, 2010, was 129. Accordingly, we find that granting the additional 36 
beds will not result in an aggregate number of operating rooms, 
procedure rooms, and beds for which the hospital is licensed that 
exceeds 200 percent of the hospital's baseline.

IV. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

    Dated: October 22, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 2014-25940 Filed 10-30-14; 8:45 am]
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