2008 Inpatient PPS Update Includes New Obligations To Disclose Physician Ownership And Emergency Response Capabilities To Patients

On April 13, 2007, the Centers for Medicare and Medicaid Services (CMS) posted its annual proposed update to the hospital inpatient prospective payment system (IPPS) for fiscal year 2008. Included among the many proposed changes are new patient notification obligations concerning physician ownership and emergency response capabilities that could potentially apply to all hospitals.

In recent years, Congress and CMS have been keenly focused on specialty hospital development. In early 2006, Congress approved legislation that directed the Secretary of the U.S. Department of Health and Human Services (HHS) to prepare a plan for dealing with physician investment in specialty hospitals. HHS submitted the final required report to Congress on August 8, 2006, and in it detailed a variety of steps that CMS had already taken, and those they would be taking to address specialty hospital development.

Physician Ownership Notification

Among the steps that HHS said CMS would take was implementation of a requirement that hospitals report information on a periodic basis about investment and compensation relationships with physicians. The proposed rule that was unveiled last week elaborates on this requirement for the first time.

CMS is now proposing that all hospitals, not just specialty hospitals, that are "physician-owned" be required to notify patients of this fact and that a list of physician owners is available upon request. Interestingly, CMS is not requiring that physician-owned hospitals provide any related disclosure or report to CMS or other federal enforcement authorities, despite suggestions in the initial report to the contrary.

CMS is also proposing that physician-owned hospitals require that all physician owners who are also members of the hospital's medical staff disclose in writing their ownership interest in the hospital to all patients they refer to the hospital, as a condition of continued medical staff membership. Patient disclosure would be required at the time a physician makes a referral. Notably, this would be an affirmative obligation upon the hospital, as well as the physician, and the hospital would be required to monitor and enforce.

CMS is proposing to define a "physician-owned hospital" as any participating hospital in which a physician or physicians have an ownership or investment interest. The ownership or investment interest may be through equity, debt or other means, and would include an interest in an entity that holds an...