[Federal Register Volume 87, Number 27 (Wednesday, February 9, 2022)]
[Notices]
[Pages 7471-7473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02739]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1774-PN]


Medicare Program; Announcement 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: Notice with request for comment.

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SUMMARY: The Social Security Act prohibits a physician-owned hospital 
from expanding its facility capacity unless the Secretary of the 
Department of Health and Human Services grants the hospital's request 
for an exception to that prohibition after considering input on the 
request from individuals and entities in the community where the 
hospital is located. The Centers for Medicare & Medicaid Services has 
received a request from a physician-owned hospital for an exception to 
the prohibition on expansion of facility capacity. This notice solicits 
comments on the request from individuals and entities in the community 
in which the hospital is located. Community input may inform our 
determination regarding whether the requesting hospital qualifies for 
an exception to the prohibition on expansion of facility capacity.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by March 11, 2022.

ADDRESSES: In commenting, refer to file code CMS-1774-PN.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1774-PN, P.O. Box 8010, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1774-PN, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: [email protected].

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that website to view public comments. CMS will not post on 
Regulations.gov public comments that make threats to individuals or 
institutions or suggest that the individual will take actions to harm 
the individual. CMS continues to encourage individuals not to submit 
duplicative comments. We will post acceptable comments from multiple 
unique

[[Page 7472]]

commenters even if the content is identical or nearly identical to 
other comments.

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 payable by Medicare to 
an entity with which he or she (or an immediate family member) has a 
financial relationship 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 any improperly referred designated health services. A 
financial relationship may be an ownership or investment interest in 
the entity or a compensation arrangement with the entity. The statute 
establishes a number of specific exceptions and grants the Secretary of 
the Department of Health and Human Services (the Secretary) the 
authority to create regulatory exceptions for financial relationships 
that do not pose a risk of program or patient abuse.
    Section 1877(d) of the Act sets forth exceptions 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''). In order to qualify for the rural provider 
exception, the designated health services must be furnished in a rural 
area (as defined in section 1886(d)(2) of the Act) and substantially 
all the designated health services furnished by the entity must be 
furnished to individuals residing 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''). In order to qualify for 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.

II. Prohibition on Facility Expansion

    Section 6001(a)(3) of the Patient Protection and Affordable Care 
Act (Affordable Care Act) (Pub. L. 111-148) amended the rural provider 
and whole hospital exceptions to provide that a hospital 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 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) (the 
hospital's ``baseline number of operating rooms, procedure rooms, and 
beds''). Thus, since March 23, 2010, a physician-owned hospital that 
seeks to avail itself of either exception is prohibited from expanding 
the number of operating rooms, procedure rooms, and beds (``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 prohibition by the Secretary.
    Section 6001(a)(3) of the Affordable Care Act added new section 
1877(i)(3)(A)(i) of the Act, which required the Secretary to establish 
and implement an exception process to the prohibition on expansion of 
facility capacity for hospitals that qualify as an ``applicable 
hospital.'' Section 1106 of the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) amended section 
1877(i)(3)(A)(i) of the Act to require the Secretary to establish and 
implement an exception process to the prohibition on expansion of 
facility capacity for hospitals that qualify as either an ``applicable 
hospital'' or a ``high Medicaid facility.'' These terms are defined at 
sections 1877(i)(3)(E) and 1877(i)(3)(F) of the Act. The process for 
requesting an exception to the prohibition on expansion of facility 
capacity is discussed in section III of this notice.
    The requirements for qualifying as an applicable hospital are set 
forth at Sec.  411.362(c)(2), and the requirements for qualifying as a 
high Medicaid facility are set forth at Sec.  411.362(c)(3). An 
applicable hospital means a hospital: (1) That is located in a county 
in which the percentage increase in the population during the most 
recent 5-year period (as of the date that the hospital submits its 
request for an exception to the prohibition on expansion of facility 
capacity) is at least 150 percent of the percentage increase in the 
population growth of the State in which the hospital is located during 
that period, as estimated by the Bureau of the Census; (2) whose annual 
percent of total inpatient admissions under Medicaid is equal to or 
greater than the average percent with respect to such admissions for 
all hospitals in the county in which the hospital is located during the 
most recent 12-month period for which data are available (as of the 
date that the hospital submits its request for an exception to the 
prohibition on expansion of facility capacity); (3) that does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries; (4) that is located in a State in which the 
average bed capacity in the State is less than the national average bed 
capacity; and (5) that has an average bed occupancy rate that is 
greater than the average bed occupancy rate in the State in which the 
hospital is located. The regulations at Sec.  411.362(c)(2)(ii), (iv), 
and (v) specify acceptable data sources for determining whether a 
hospital qualifies as an applicable hospital. A ``high Medicaid 
facility'' means a hospital that: (1) Is not the sole hospital in a 
county; (2) with respect to each of the three most recent 12-month 
periods for which data are available, 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 the county in which the hospital is located; and 
(3) does not discriminate against beneficiaries of Federal health care 
programs and does not permit physicians practicing at the hospital to 
discriminate against such beneficiaries. The regulation at Sec.  
411.362(c)(3)(ii) specifies the acceptable data sources for determining 
whether a hospital qualifies as a high Medicaid facility.

III. Exception Request Process

    In the Calendar Year (CY) 2012 Outpatient Prospective Payment 
System/Ambulatory Surgical Centers (OPPS/ASC) final rule (76 FR 74121), 
we published regulations establishing the process for a hospital to 
request an exception from the prohibition on facility expansion (the 
``exception process'') at Sec.  411.362(c)(4), community input related 
to a hospital's request at Sec.  411.362(c)(5), and related definitions 
at Sec.  411.362(a). In the CY 2021 OPPS/ASC final rule (85 FR 85866), 
we revised the regulations that set forth the exception process with 
respect to high Medicaid facilities to remove certain regulatory 
restrictions that are not included in the Act. As of January 1,

[[Page 7473]]

2021, a high Medicaid facility may request an exception to the 
prohibition on expansion of facility capacity more frequently than once 
every 2 years; may request to expand its facility capacity beyond 200 
percent of the hospital's baseline number of operating rooms, procedure 
rooms, and beds; and is not restricted to locating approved expansion 
capacity on the hospital's main campus.
    Section 1877(i)(3)(A)(ii) of the Act and our regulations at Sec.  
411.362(c)(5) provide 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. For further information, we refer readers to the CMS 
website at: http://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Physician_Owned_Hospitals.html. As stated in our 
regulations, we will solicit community input on the request for an 
exception by publishing a notice of the request in the Federal 
Register. Individuals and entities in the hospital's community will 
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). In the CY 2012 OPPS/ASC final rule, 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 
programs; however, we noted that these were examples only and that we 
will 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 will have 30 days after such 
notice to submit a rebuttal statement (Sec.  411.362(c)(5)).
    A request for an exception to the facility expansion prohibition is 
considered complete as follows:
     If the request, any written comments, and any rebuttal 
statement include only filed Medicare hospital cost report data 
(Healthcare Cost Report Information System (``HCRIS'') data): (1) The 
end of the 30-day comment period if CMS receives no written comments 
from the community; or (2) the end of the 30-day rebuttal period if CMS 
receives written comments from the community, regardless of whether the 
hospital submitting the request submits a rebuttal statement (Sec.  
411.362(c)(5)(i)).
     If the request, any written comments, or any rebuttal 
statement include data from an external data source, no later than: (1) 
180 days after the end of the 30-day comment period if CMS receives no 
written comments from the community; and (2) 180 days after the end of 
the 30-day rebuttal period if CMS receives written comments from the 
community, regardless of whether the hospital submitting the request 
submits a rebuttal statement (Sec.  411.362(c)(5)(ii)).
    The CMS decision to grant or deny a hospital's request for an 
exception to the prohibition on expansion of facility capacity must be 
published in the Federal Register in accordance with our regulations at 
Sec.  411.362(c)(7).

IV. Hospital Exception Request

    As permitted by section 1877(i)(3) of the Act and our regulations 
at Sec.  411.362(c), the following physician-owned hospital has 
requested an exception to the prohibition on expansion of facility 
capacity:

Name of Facility: Doctors Hospital at Renaissance, Ltd.
Location: 5501 South McColl Road, Edinburg, Texas 78539
Basis for this Exception Request: High Medicaid Facility

    We seek comments on this request from individuals and entities in 
the community in which the hospital is located. We encourage interested 
parties to review the hospital's request, which is posted on the CMS 
website at: http://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Physician_Owned_Hospitals.html. We especially 
welcome comments regarding whether the hospital qualifies as a high 
Medicaid facility.
    Individuals and entities wishing to submit comments on the 
hospital's request should state whether or not they are in the 
community in which the hospital is located. We suggest that parties 
review the DATES and ADDRESSES sections above to ensure timely 
submission of their comments.

V. 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.).

VI. Response to Comments

    We will consider all comments we receive by the date and time 
specified in the DATES section of this preamble.
    The Administrator of the Centers for Medicare & Medicaid Services 
(CMS), Chiquita Brooks-LaSure, having reviewed and approved this 
document, authorizes Lynette Wilson, who is the Federal Register 
Liaison, to electronically sign this document for purposes of 
publication in the Federal Register.

    Dated: February 4, 2022.
Lynette Wilson,
Federal Register Liaison, Centers for Medicare & Medicaid Services.
[FR Doc. 2022-02739 Filed 2-8-22; 8:45 am]
BILLING CODE 4120-01-P