Medicare Compliance & Reimbursement

Will a cash cow be put out to pasture? 

A lucrative investment opportunity for physicians just got a lot stickier.

Business has been booming in the world of physician-owned specialty hospitals, but critics have long worried that such hospitals simply bleed off generously reimbursed cases from cash-strapped general acute care hospitals.

The critics scored a victory in the Medicare reform bill, signed into law Dec. 10. The legislation contains a provision that will make it a lot harder to go forward with new physician-owned specialty hospitals.

To make sure their investment arrangements comply with the Stark physician self-referral law, specialty hospitals typically take advantage of exceptions to the Stark law that relate to physician ownership interests in hospitals and services provided in rural areas.

Thanks to the reform bill, however, those exceptions are now off-limits. While the Stark provision allows existing facilities and facilities under development to continue taking advantage of the exceptions, they won't be available for new specialty hospitals.

The legislation also calls for the Medicare Payment Advisory Commission and the Department of Health and Human Services to study the implications of the emergence of specialty hospitals.

Lesson Learned: Physicians planning to invest in a specialty hospital should make sure they reckon with the Stark provisions of the Medicare reform bill.