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, 77844-77847 [2022-27566]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 87, Number 243 (Tuesday, December 20, 2022)]
[Notices]
[Pages 77844-77847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27566]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1774-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: Notice.

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SUMMARY: This notice announces our decision to approve the request from 
Doctors Hospital at Renaissance, Ltd.'s for an exception to the 
prohibition on expansion of facility capacity.

DATES: The decision announced in this notice is applicable on December 
16, 2022.

ADDRESSES: [email protected].

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. In addition, 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 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 a process for granting exceptions 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 a process for granting exceptions to the prohibition on 
expansion of facility capacity for hospitals that qualify as either an 
``applicable hospital'' or a ``high

[[Page 77845]]

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. 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)(2)(ii) specifies the 
acceptable data sources for determining whether a hospital qualifies as 
an applicable hospital, and 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 Approval 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), the process for 
obtaining 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 2015 OPPS/ASC final rule (79 FR 66770), we expanded the 
permissible data sources on which a hospital may rely to show that it 
is qualified to request an exception to the prohibition on expansion of 
facility capacity (that is, that the hospital qualifies as either an 
applicable hospital or a high Medicaid facility). We also amended the 
exception process established in the CY 2012 OPPS/ASC final rule to 
increase the period of time after which an exception request will be 
deemed complete when an external data source is used by a requesting 
hospital or in the public comments to determine whether a hospital 
qualifies as either an applicable hospital or high Medicaid facility. 
In the CY 2015 OPPS/ASC final rule, we stated that it is possible (if 
not likely) that, when reviewing an expansion exception request, the 
Centers for Medicare & Medicaid Services (CMS) would need to verify the 
data (and other information, if any) provided by the requesting 
hospital and any commenters, as well as consider the data in light of 
the information otherwise available to CMS (79 FR 66995).
    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, 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, if 
its request is granted, is not restricted to locating approved 
expansion capacity on the hospital's main campus. An applicable 
hospital remains subject to the statutory limitation on the frequency 
of requests for an exception to the prohibition on expansion of 
facility capacity (no more than once every 2 years); may not request to 
expand its facility capacity beyond 200 percent of the hospital's 
baseline number of operating rooms, procedure rooms, and beds; and, if 
its request is granted, is restricted to locating approved expansion 
capacity on the hospital's main campus.
    Our regulations at Sec.  411.362(c)(5) require us to 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 hospital requesting the 
exception does or does not qualify as an applicable hospital or high 
Medicaid facility as defined at Sec.  411.362(c)(2) and (3), 
respectively. In the November 30, 2011 final rule (76 FR 74522), 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 
do not restrict the type of community input that may be submitted. If 
we receive timely comments from the community, we notify the requesting 
hospital, and the hospital has 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 Healthcare Provider Cost Reporting Information 
System (HCRIS) data, the request is considered complete as of: (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, the request is 
considered complete no later than: (1) 180 days after the end of the 
30-day comment period if CMS receives no written comments from the 
community; or (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

[[Page 77846]]

submitting the request submits a rebuttal statement (Sec.  
411.362(c)(5)(ii)).
    If we grant the request for an exception to the prohibition on 
expansion of facility capacity for a hospital that qualifies as an 
applicable hospital, 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)). If we grant the 
request for an exception to the prohibition on expansion of facility 
capacity for a hospital that qualifies as a high Medicaid facility, 
these limitations do not apply. 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. Public Response to Notice With Comment Period

    On February 9, 2022, we published a notice in the Federal Register 
entitled ``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'' 
(87 FR 7471). In the February 9, 2022 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, Ltd.
    Location: 5501 South McColl Road, Edinburg, Texas 78539.
    Basis for Exception Request: High Medicaid Facility.
    The request that is the subject of this notice is the second 
request for an exception to the prohibition against expansion of 
facility capacity that Doctors Hospital at Renaissance, Ltd. (DHR) has 
submitted to CMS. In the September 17, 2015 Federal Register notice (80 
FR 55851), we published our decision granting DHR's request to add a 
total of 551 operating rooms, procedure rooms, and beds for which it is 
licensed, permitting an increase in DHR's facility capacity to 200 
percent of its baseline number of operating rooms, procedure rooms, and 
beds (the 2014 Request). DHR qualified as an applicable hospital at the 
time it submitted its 2014 Request, which occurred prior to the 
regulatory revisions that became effective on January 1, 2021. As 
stated above, the January 1, 2021 regulatory revisions permit a 
hospital that qualifies as a high Medicaid facility to: (1) request an 
exception to the prohibition on expansion of facility capacity more 
frequently than once every 2 years; and (2) request to expand its 
facility capacity beyond 200 percent of the hospital's baseline number 
of operating rooms, procedure rooms, and beds. From September 11, 2015 
(the effective date of our decision to grant the 2014 Request) until 
January 1, 2021, DHR was prohibited from submitting a second request 
for an exception to the prohibition against expansion of facility 
capacity under section 1877(i)(3)(B) of the Act and Sec.  411.362(c)(1) 
(as then in effect). DHR submitted the request that is the subject of 
this notice (the 2021 Request) on July 21, 2021.
    During the 30-day public comment period, we received 14 public 
comments through www.regulations.gov. Twelve comments supported CMS 
approving DHR's 2021 Request for an exception to the prohibition 
against expansion of facility capacity; two comments opposed CMS 
approving the request. The comments in opposition to CMS approving the 
2021 Request did not challenge DHR's qualification as a high Medicaid 
facility in Hidalgo County, Texas. Rather, the commenters asserted 
that, even if DHR qualifies as a high Medicaid facility, CMS has 
authority to deny the request and, to be consistent with the statutory 
purpose of allowing limited expansion of grandfathered physician-owned 
hospitals, which focuses on the need for additional facility capacity 
and beneficiary interests in the community in which the requesting 
hospital is located, CMS should deny the request. One of these 
commenters asserted that, given DHR's publicly-stated plans to expand 
outside Hidalgo County, Texas, granting the 2021 Request would result 
in the establishment of a new physician-owned hospital in contravention 
of section 1877(i) of the Act.
    On April 22, 2022, DHR filed a rebuttal statement in response to 
the comments that opposed CMS granting its 2021 Request for an 
exception to the prohibition against expansion of facility capacity. 
Among other things, DHR asserted that, because it qualifies as a high 
Medicaid facility, CMS must grant its 2021 Request for an exception to 
the prohibition against expansion of facility capacity.

V. Decision

    DHR submitted the information, data, and certifications specified 
at Sec.  411.362(c)(4). This notice announces our decision with respect 
to DHR's 2021 Request for an exception to the prohibition against 
expansion of facility capacity.

A. Qualification as a High Medicaid Facility

    In order to make a request with respect to which CMS may issue a 
decision, a hospital must qualify as an applicable hospital or a high 
Medicaid facility. As of the date of its 2021 Request, DHR was located 
in Hidalgo County, Texas. We determined that, on the date the 2021 
Request was submitted, DHR qualified as a high Medicaid facility in 
Hidalgo County, Texas, for the following reasons:
     DHR is not the sole hospital in Hidalgo County, Texas;
     With respect to each of the three most recent 12-month 
periods for which data were available as of the date the hospital 
submitted its 2021 Request, DHR had an annual percent of total 
inpatient admissions under Medicaid that was estimated to be greater 
than such percent with respect to such admissions for any other 
hospital located in Hidalgo County, Texas; and
     DHR 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.

B. Decision Regarding the 2021 Request for an Exception to the 
Prohibition on Facility Expansion

    After reviewing DHR's 2021 Request, the public comments, and DHR's 
rebuttal statement, we are granting DHR's 2021 Request for an exception 
to the prohibition against expansion of facility capacity. Our decision 
grants DHR's 2021 Request to add a total of 551 operating rooms, 
procedure rooms, and beds. Under the regulations in effect as of the 
date that the 2021 Request was submitted, the location of the expansion 
is not limited to facilities on the hospital's main campus, and may 
result in the number of operating rooms, procedure rooms, and beds for 
which DHR is licensed exceeding 200 percent of its baseline number of 
operating rooms, procedure rooms, and beds.
    CMS makes no determination as to whether, following expansion, any 
financial relationships between DHR and its physician owners would 
satisfy any other requirement of the whole hospital or rural hospital 
exceptions.

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VI. 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.).
    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: December 15, 2022.
Lynette Wilson,
Federal Register Liaison, Center for Medicare & Medicaid Services.
[FR Doc. 2022-27566 Filed 12-16-22; 4:15 pm]
BILLING CODE 4120-01-P