Advisory opinions (AOs) are always limited to the specific anonymous case, but sometimes they signal a shift in policy -- especially when issued by CMS, which does so only rarely. CMS' first AO in four years seems to bless a physician-owned hospital's move to a new location and addition of an emergency department -- and to say this would not violate the "whole hospital exception" under Stark Law. Readers of our practice management weekly who are not lawyers would like a clear explanation as to: - What hospitals are allowed the whole hospital exception; - Are the relocation / ER factors significant, and how comfortable physician owners can be that they can do something similar without violating Stark; - Whether this AO means similar hospitals could add other services -- e.g. new imaging services; - What pitfalls hospitals seeking to make a similar change should avoid in terms of business structure, licensing, etc.

I've tackled a few challenges around the Stark Law and navigating CMS guidelines, so let's break it down a bit. The "whole hospital exception" under the Stark Law generally allows physicians to refer patients to a hospital they own, provided the ownership is in the entire hospital and not just specific services. So, hospitals that are entirely owned by physicians can usually fit within this exception. Now, regarding the recent AO, it does seem like a big deal because it reassures physician-owned hospitals wanting to relocate or expand with an emergency department. This doesn't mean they're in the clear for any change, though. Hospitals need to carefully align their plans with the specific scenarios addressed by CMS to avoid stepping outside of legal boundaries. For instance, while this AO looks favorably on adding an ER, expanding into other areas like new imaging services isn't automatically covered. Each new service potentially requires its own review and justification. If you're in a similar position thinking about expanding or relocating, don't just chuck caution to the wind. It’s crucial to ensure the entire expansion or relocation process is transparent and compliant with CMS standards. This includes maintaining the necessary licensing and adhering strictly to established business structures. Business structure and licenses could be pitfalls if they don't align with the legal requirements post-change. Always keep the dialogue open with legal advisors and possibly consider seeking your own AO if your plans start to look significantly different. Just keep it tight and by the book – stepping out of line could bring the whole house of cards down.

Who Qualifies for the Whole Hospital Exception? Eligibility: Physician-owned hospitals (POHs) with physician ownership and a Medicare provider agreement by Dec. 31, 2010, per 42 C.F.R. SS 411.356(c)(3). ACA Restrictions: No new POHs or expansions of beds, operating rooms, or procedure rooms beyond Mar. 23, 2010 levels, unless granted an exception (e.g., high Medicaid facilities). Requirements: Maintain consistent ownership, licensure, services, patient base, and Medicare provider agreement. Ownership can't be conditioned on referrals. Significance of Relocation and ED Addition CMS-AO-2025-1 (Feb. 26, 2025): Approved an 8-mile relocation and emergency department (ED) addition, deeming the POH the "same hospital." CMS Approach: Holistic review of ownership, licensure, tax ID, bed count, services, and patient base continuity. Implications: Suggests flexibility for similar moves if core factors remain unchanged. Physician owners should be cautiously optimistic but seek legal advice, as approval is case-specific. Adding Other Services (e.g., Imaging) Potential: Services like imaging may be permissible if they don't increase licensed beds or procedure rooms. CMS-AO-2021-2 allowed unlicensed observation beds, supporting non-licensed expansions. Limitations: Must maintain "same hospital" status. Case-specific rulings require CMS or legal confirmation to avoid Stark violations. Pitfalls to Avoid Business Structure: No changes to ownership, leadership, or tax ID. Keep physician ownership at or below Mar. 23, 2010 levels. Licensing: Confirm state licensure continuity. Secure approvals for structural changes. Avoid certificate of need issues. Compliance: Notify state health departments. Certify no changes to bed count or services. Expansion: Adhere to ACA limits on licensed beds, operating rooms, and procedure rooms. Documentation: Submit detailed certifications to CMS, proving compliance with Stark requirements. Next Steps Engage legal counsel to assess Stark compliance. Consider requesting a CMS advisory opinion for specific plans. Monitor state regulations and CMS guidance for updates. Sources: CMS-AO-2025-1, natlawreview.com, mcguirewoods.com, btlaw.com