As described in our prior alert, the Centers for Medicare & Medicaid Services (“CMS”) has, for the past several years, been seeking ways to reduce its regulatory burden on health care providers. In furthering this initiative, on May 12, 2014, CMS issued Part II of a final rule entitled Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction (“Final Rule”). Perhaps most significantly, the new provisions allow increased flexibility in hospital governance, in particular by allowing multi-hospital health systems to utilize a single consolidated medical staff model. Below we detail the new changes to the hospital governance requirements and highlight certain other key provisions of the Final Rule.
Medical Staff Requirements
In the Final Rule, CMS clarified its Conditions of Participation (“CoPs”) for hospital medical staffs in two key areas: (1) whether each hospital within a multi-hospital system must have its own individual medical staff, and (2) who may be a member of a medical staff.
In regard to the first issue, the Final Rule resolves prior confusion by explicitly allowing a multi-hospital system to utilize a unified, integrated medical staff structure rather than having a separate medical staff at each component hospital. In order to employ this optional approach, each constituent hospital’s medical staff must decide voluntarily to integrate into the consolidated system medical staff, and the health system must confirm that this structure is permissible under state law. The Final Rule specifies that the following four requirements must be met under the unified medical staff model:
The medical staff of each hospital must have voted by majority in accordance with its bylaws to join, or to opt out of, the unified medical staff;
The unified medical staff must have bylaws, rules, and requirements describing its processes for self-governance, credentialing, peer review, and due process, which shall include advising each medical staff of its rights under (1) above;
The unified medical staff must be established in a manner that takes into account each hospital’s unique circumstances with respect to any significant differences in patient populations and hospital services; and
The unified medical staff must operate in a way that gives due consideration to the needs and concerns of all members of the medical staff, regardless of their practice or location, to ensure that localized issues applicable to particular hospitals are duly considered and addressed.
Commenters asserted that a unified medical staff model could improve the efficiency and effectiveness of a health system’s peer review processes, call coverage capabilities, quality improvement initiatives, and emergency preparedness plans.
Regarding the composition of the medical staff, CMS acknowledged that its use of the term “non-physician practitioners” in Part I of the rulemaking had created confusion and had caused some hospitals to think that other types of non-MD/DO physicians, e.g., doctors of dental surgery or doctors of dental medicine, could not be members of the medical staff. Therefore, the Final Rule revises the applicable CoP to state that the “medical staff must be composed of doctors of medicine or osteopathy,” and “may also include other categories of physicians… and non-physician practitioners who are determined to be eligible for appointment by the governing body.”
In Part I of this rulemaking, CMS finalized changes explicitly allowing a single governing body to oversee a multi-hospital system. Additionally, Part I added a requirement that a medical staff member must serve on a hospital’s governing body. Some commenters objected to this requirement, stating that it conflicted with local and state laws in some places (e.g., where members of a hospital’s governing body must be elected or appointed by a state or local official). Responding to this concern and other feedback, CMS has removed the requirement that a medical staff member must serve on a hospital’s governing body.
In light of the deletion of this requirement, the Final Rule instead obligates a governing body to “periodically” consult with the individual responsible for the organized medical staff, or his/her designee, to discuss matters related to the quality of medical care provided to patients of the hospital. In commentary, CMS clarified that the frequency of these consultations should be based on factors including the scope and complexity of the services offered at that hospital, as well as the patient safety, quality of care, and performance improvement issues requiring the attention of the governing body. CMS also noted that this requirement could be satisfied by having a medical staff member serve on the governing body, provided that (i) this person is the individual responsible for the organization and conduct of the medical staff, or that individual’s designee, and (ii) membership on the board involves meeting periodically throughout the year and discussing matters related to the quality of medical care provided to patients of the hospital.
If a multi-hospital system has chosen to have a single governing body, the governing body is required to directly consult with the responsible individual of the organized medical staff from each hospital within the system. In commentary, CMS clarified the definition of “direct consultation” to mean telecommunication or face-to-face communication. Responding to concerns regarding the increased burden to consult with each hospital, CMS noted that the provision does not require separate consultations, and a governing body may employ a committee structure to consult with medical staff leaders from multiple hospitals simultaneously.
Other Highlights of the Final Rule
Other changes intended to improve efficiency and flexibility for hospitals and other types of health care providers include:
Practitioners able to order hospital outpatient services. In keeping with its recent guidance on this topic, CMS has incorporated into the CoPs the ability of a nonmember of the medical staff to order outpatient services at a hospital. The practitioner must be (i) responsible for the care of the patient, (ii) licensed in the state where he/she provides care to the patient, (iii) acting within his/her scope of practice, and (iv) authorized in accordance with policies adopted by the medical staff to order outpatient services.
Critical Access Hospital (“CAH”) provision of services. CMS removed the requirement that a non-CAH staff member must provide input on CAH policies.
CAH, Rural Health Clinic, and Federally Qualified Health Center physician responsibilities. CMS eliminated the requirement that a physician must be physically present at these types of centers at least once every two weeks. The Final Rule simply requires that a physician be on-site for “sufficient periods of time” based on the needs of the facility and its patients.
Reclassification of swing-bed services. CMS has reclassified swing beds as an optional hospital service, meaning that compliance with the swing-bed requirements can be evaluated by a CMS-approved accrediting organization. A separate state agency survey of these beds will no longer be necessary.
Long-term care (“LTC”) sprinkler deadline extension. CMS will allow LTC facilities in certain cases to apply for a deadline extension of up to two years to install automatic sprinkler systems. An additional extension of one year may be granted based on the particular circumstances.
Health care providers should consider whether any of the revised provisions allowing new flexibility would represent an opportunity for improved operations within their organizations. Every hospital should ensure that it has a mechanism in place for periodic direct communication between its governing body and a representative of its medical staff, or of each medical staff in the case of a multi-hospital system. In regard to the unified medical staff model, a health system interested in this approach should consider whether there are state law obstacles to its implementation. Furthermore, the health system should introduce this idea to the medical staff of each of its hospitals to determine whether the necessary support is present for converting to this model.
 See 77 Fed. Reg. 29033 (May 16, 2012) (“Part I”).
 79 Fed. Reg. 27106 (May 12, 2014).
 See 42 C.F.R. Part 482. A hospital must satisfy the CoPs in order to participate in the Medicare program.
 79 Fed. Reg. at 27154 (to be codified at 42 C.F.R. § 482.22(a)) (emphasis added).
 79 Fed. Reg. at 27112.
 Id. at 27113.