The Centers for Medicare and Medicaid Services (CMS) recently published proposed regulations in the Medicare hospital outpatient prospective payment system (OPPS) that would provide certain rural providers and physician-owned hospitals with a process to apply for, and possibly obtain, an exception to the general prohibition against the expansion of physician-owned hospitals. These proposed rules would also update the patient notice requirement stated in 42 C.F.R. § 489.20.

Section 6001 of the Patient Protection and Affordable Care Act (PPACA) generally prohibits the expansion of a rural provider’s and physician owned hospital’s number of operating rooms, procedure rooms and beds beyond what that hospital was licensed for as of March 23, 2010 or the date of its initial provider agreement (provided such agreement was in effect by December 31, 2010). However, § 6001(a)(3) of PPACA requires CMS to create a process by which such providers could apply for an exception to the expansion prohibition. The proposed rules issued by CMS, if finalized, would implement that section of PPACA.