[Federal Register Volume 80, Number 180 (Thursday, September 17, 2015)]
[Notices]
[Pages 55851-55853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23363]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1640-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 Doctors Hospital at Renaissance for an exception to the 
prohibition against expansion of facility capacity.

DATES: Effective Date: This notice is effective on September 11, 2015.

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

SUPPLEMENTARY INFORMATION:

I. Background

    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), 
unless the requirements of an applicable exception are satisfied; and 
(2) prohibits the entity from filing claims with Medicare (or billing 
another individual, entity, or third party payer) for those DHS 
furnished as a result of a prohibited referral.
    Section 1877(d)(2) of the Act provides an exception, known as the 
rural provider exception, for physician ownership or investment 
interests in rural providers. 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)(D) of the Act) and substantially all the 
DHS furnished by the entity must be furnished to individuals residing 
in a rural area.
    Section 1877(d)(3) of the Act provides an exception, known as the 
hospital

[[Page 55852]]

ownership 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 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 hospital ownership 
and rural provider exceptions to the physician self-referral 
prohibition to impose additional restrictions on physician ownership 
and investment in hospitals. 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 of the Department of Health and 
Human Services (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 request for an 
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 a request for an exception to the prohibition against facility 
expansion not later than 60 days after receiving a complete 
application.

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 specifies the process for submitting, 
commenting on, and reviewing a request for an exception to the 
prohibition on expansion of facility capacity. We published a 
subsequent final rule in the Federal Register on November 10, 2014 (79 
FR 66770, 66987 through 66997) that made certain revisions. These 
revisions include, among other things, permitting the use of data from 
an external data source, as defined in our regulations, or from the 
Hospital Cost Report Information System (HCRIS) for specific 
eligibility criteria.
    As stated in our regulations at Sec.  411.362(c)(5), we solicit 
community input on a request for an exception by publishing a notice of 
the request in the Federal Register. Individuals and entities have 30 
days to submit written comments on the request, which 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 defined in Sec.  
411.362(c)(2) and (c)(3), respectively. We notify the hospital of 
comments received, and the hospital has 30 days after such notice to 
submit a rebuttal statement (Sec.  411.362(c)(5)(ii)). Section 
411.362(c)(5) also specifies the timing for when CMS deems a request 
for an exception to the facility expansion prohibition complete.
    If we grant the request for an exception, 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 to exceed 200 percent of the hospital's baseline 
number of operating rooms, procedure rooms, and beds (Sec.  
411.362(c)(6)).

III. Public Response to Notice With Comment Period

    On May 8, 2015, we published a notice in the Federal Register (80 
FR 26566) 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 8, 2015 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: Doctors Hospital at Renaissance (DHR).
    Location: 5501 South McColl Road, Edinburg, Texas 78539.
    Basis for Exception Request: Applicable Hospital.

    In the May 8, 2015 notice, we also solicited comments from 
individuals and entities in the community in which DHR is located.
    We received 21 comments, 14 of which were variations of a form 
letter, and commenters generally opposed DHR's request to expand.
    One or more of the commenters raised questions or concerns 
regarding:
     Whether DHR's request conforms to the procedural 
requirements set forth at Sec.  411.362(c);
     Whether DHR demonstrated that it satisfied the population 
growth criterion using the data required under Sec.  411.362(c)(2)(i);
     Whether the data source used by DHR to demonstrate 
satisfaction of the inpatient Medicaid admissions criterion at Sec.  
411.362(c)(2)(ii) was permissible;
     Whether DHR satisfied the non-discrimination criterion at 
Sec.  411.362(c)(2)(iii);
     How a facility expansion by DHR would affect the community 
in which it is located; and
     The amount of increased facility capacity requested by 
DHR.
    On June 16, 2015, as required by Sec.  411.362(c)(5)(ii), we 
notified DHR that we received comments in response to the May 8, 2015 
notice and that these comments were available for public viewing at 
http://www.regulations.gov. DHR submitted a rebuttal statement on July 
15, 2015. The statement rebutted each of the commenters' assertions 
regarding the applicable hospital eligibility criteria and addressed 
the concerns expressed by the commenters regarding an expansion by the 
hospital.

IV. Decision

    This final notice announces our decision to approve DHR's request 
for an exception to the prohibition against expansion of facility 
capacity. As required by our current regulations and public guidance 
documents, DHR submitted the data and certifications necessary to 
demonstrate that it satisfies the criteria to qualify as an applicable 
hospital. Further, CMS considered the assertions of the commenters 
about DHR's compliance with the procedural requirements set forth at 
Sec.  411.362(c), the population growth criterion under Sec.  
411.362(c)(2)(i), the data source used by DHR to demonstrate 
satisfaction of the inpatient Medicaid admissions criterion at Sec.  
411.362(c)(2)(ii), and the non-discrimination criterion at Sec.  
411.362(c)(2)(iii). Following our review of the information provided by 
the commenters, we are not persuaded that DHR failed to satisfy one or 
more of the applicable hospital eligibility criteria or that its 
request failed to conform to our procedural requirements. Also, CMS 
cannot consider any concerns unrelated to the statutory and regulatory 
eligibility criteria when determining whether to grant an exception to 
a requesting hospital. In addition, if a hospital qualifies as either 
an applicable hospital or high Medicaid facility, CMS does not have the 
discretion to grant less than the requested increase in facility 
capacity.
    In accordance with section 1877(i)(3) of the Act, we are granting 
DHR's request for an exception to the prohibition against expansion of 
facility capacity based on the following criteria:

[[Page 55853]]

     DHR is located in Hidalgo County, which has a percentage 
increase in population that is at least 150 percent of the percentage 
increase in Texas' population during the most recent 5-year period for 
which data was available as of the date that DHR submitted its request;
     DHR has an annual percentage of total inpatient admissions 
under Medicaid that is equal to or greater than the average percentage 
with respect to such admissions for all hospitals located in Hidalgo 
County during the most recent 12-month period for which data are 
available as of the date that DHR submitted its request;
     DHR certified and provided satisfactory documentation 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;
     DHR is located in Texas, which has an average bed capacity 
that is less than the national average bed capacity during the most 
recent fiscal year for which HCRIS, as of the date that the hospital 
submitted its request, contained data from a sufficient number of 
hospitals to determine Texas' average bed capacity and the national 
average bed capacity; and
     DHR has an average bed occupancy rate that is greater than 
the average bed occupancy rate in Texas during the most recent fiscal 
year for which HCRIS, as of the date that DHR submitted its request, 
contained data from a sufficient number of hospitals to determine its 
average bed occupancy rate and Texas' average bed occupancy rate.
    In determining that DHR satisfied the Medicaid inpatient 
admissions, bed capacity and bed occupancy criteria, we deemed the 
HCRIS and Texas State Medicaid Agency data used by DHR to satisfy the 
standards set forth in the regulations published on November 10, 2014, 
for those criteria.
    Our approval grants DHR's request to add a total of 551 operating 
rooms, procedure rooms, and beds for which DHR is licensed. 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 to 
exceed 200 percent of the hospital's baseline number of operating 
rooms, procedure rooms, and beds. DHR certified that its baseline 
number of operating rooms, procedure rooms, and beds for which it was 
licensed as of March 23, 2010, was 551. Accordingly, we find that 
granting the additional 551 operating rooms, procedure rooms, and beds 
will not exceed the limitation on a permitted expansion.

IV. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

    Dated: September 4, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 2015-23363 Filed 9-16-15; 8:45 am]
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