This document is scheduled to be published in the

Federal Register on 05/12/2014 and available online at

http://federalregister.gov/a/2014-10872, and on FDsys.gov

DEPART

Centers 

[CMS-16

Medicar

Capacity

Self-Refe

AGENC

ACTION

SUMMA

hospital i

hospital’

request fr

Centers f

owned ho

notice so

the physi

regarding

expansio

DATES:

the addre

publicati

ADDRES

resource 

TMENT OF

for Medica

615-NC] 

re Program;

y under the 

erral Prohib

CY: Centers 

N: Notice w

ARY: Under

is effectively

s request for

from individu

for Medicare

ospital for an

olicits comm

ician-owned

g whether th

n of facility 

 Comment 

esses provide

on in the Fe

SSES: In co

limitations, 

F HEALTH

re & Medic

; Request fo

Hospital O

bition 

for Medicar

with commen

r section 187

y prohibited 

r an exceptio

uals and enti

e & Medicai

n exception 

ents on the r

d hospital is l

he requesting

capacity. 

Date: To be

ed below, no

deral Regis

ommenting, 

we cannot a

H AND HUM

caid Service

or an Excep

Ownership a

re & Medica

nt period. 

77(i) of the S

from expand

on to that pro

ities in the co

d Services (C

to the prohib

request from

located. Com

g hospital qu

e assured con

o later than 5

ter]. 

please refer 

accept comm

MAN SERV

s 

ption to the 

nd Rural Pr

aid Services 

Social Secur

ding facility

ohibition afte

ommunity w

CMS) has re

bition agains

m individuals

mmunity inp

ualifies for an

nsideration, 

5 p.m. on [O

to file code 

ments by facs

VICES 

Prohibition

rovider Exc

(CMS), HH

rity Act (the 

y capacity, un

er considerin

where the ho

eceived a req

st expansion

s and entities

put may info

n exception t

comments m

OFR--insert d

CMS-1615-

simile (FAX

n on Expans

ceptions to t

S. 

Act), a phys

nless the Sec

ng input on t

spital is loca

quest from a

n of facility c

s in the comm

orm our deter

to the prohib

must be rece

date 30 days 

-NC. Becau

X) transmissio

sion of Facil

the Physicia

sician-owne

cretary grant

the hospital’

ated. The 

a physiciancapacity. Th

munity in wh

rmination 

bition agains

ived at one o

after date of

use of staff an

on. 

lity

an 

d 

ts the 

’s 

his 

hich 

st 

of 

f

nd 
 2 

 You may submit comments in one of three ways (please choose only one of the ways 

listed): 

1. Electronically. You may submit electronic comments on this exception request to 

http://www.regulations.gov. Follow the instructions under the "More Search Options" tab. 

 2. By regular mail. You may mail written comments to the following address ONLY: 

 Centers for Medicare & Medicaid Services 

Department of Health and Human Services 

Attention: CMS-1615-NC 

P.O. Box 8010 

Baltimore, MD 21244-1850 

Please allow sufficient time for mailed comments to be received before the close of the comment 

period. 

3. By express or overnight mail. You may send written comments to the following 

address ONLY: 

 Department of Health and Human Services, 

 Attention: CMS-1615-NC, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

 For information on viewing public comments, see the beginning of the 

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT:

Patricia Taft, (410) 786-4561 or Teresa Walden, (410) 786-3755. 
 3 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: 

All comments received before the close of the comment period are available for viewing 

by the public, including any personally identifiable or confidential business information that is 

included in a comment. We post all comments received before the close of the comment period 

on the following website as soon as possible after they have been received: 

http://www.regulations.gov. Follow the search instructions on that website to view public 

comments. 

 We will allow stakeholders 30 days from the date of this notice to submit written 

comments. Comments received timely will be available for public inspection as they are 

received, generally beginning approximately 3 weeks after publication of this notice, at the 

headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To 

schedule an appointment to view public comments, please phone 1-800-743-3951. 

I. Background 

Section 1877 of the Social Security Act (the Act), also known as the physician selfreferral law-- (1) prohibits a physician from making referrals for certain “designated health 

services” (DHS) payable by Medicare to an entity with which he or she (or an immediate family 

member) has a financial relationship (ownership or compensation), unless an exception applies; 

and (2) prohibits the entity from filing claims with Medicare (or billing another individual, 

entity, or third party payer) for those DHS furnished as a result of a prohibited referral. 

Section 1877(d)(3) of the Act provides an exception, known as the “whole hospital 

exception,” for physician ownership or investment interests held in a hospital located outside of 
 4 

Puerto Rico, provided that the referring physician is authorized to perform services at the 

hospital and the ownership or investment interest is in the hospital itself (and not merely in a 

subdivision of the hospital). 

Section 1877(d)(2) of the Act provides an exception for physician ownership or 

investment interests in rural providers (the “rural provider exception”). In order for an entity to 

qualify for the rural provider exception, the DHS must be furnished in a rural area (as defined in 

section 1886(d)(2) of the Act) and substantially all the DHS furnished by the entity must be 

furnished to individuals residing in a rural area. 

Section 6001(a)(3) of the Patient Protection and Affordable Care Act (Pub. L. 111-148) 

as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) 

(hereafter referred to together as “the Affordable Care Act”) amended the whole hospital and 

rural provider exceptions to the physician self-referral prohibition to impose additional 

restrictions on physician ownership and investment in hospitals and rural providers. Since 

March 23, 2010, a physician-owned hospital that seeks to avail itself of either exception is 

prohibited from expanding facility capacity unless it qualifies as an “applicable hospital” or 

“high Medicaid facility” (as defined in sections 1877(i)(3)(E), (F) of the Act and 42 CFR 

411.362(c)(2), (3) of our regulations) and has been granted an exception to the prohibition by the 

Secretary. Section 1877(i)(3)(A)(ii) of the Act provides that individuals and entities in the 

community in which the provider requesting the exception is located must have an opportunity to 

provide input with respect to the provider’s application for the exception. For further 

information, visit our website at: 

http://www.cms.gov/Medicare/Fraud-andAbuse/PhysicianSelfReferral/Physician_Owned_Hospitals.html. 
 5 

II. Exception Request Process 

On November 30, 2011, we published a final rule in the Federal Register (76 FR 74122, 

74517 through 74525) that, among other things, finalized §411.362(c), which specified the 

process for submitting, commenting on, and reviewing a request for an exception to the 

prohibition on expansion of facility capacity. We specified that prior to our review of the 

request, we will solicit community input on the request for an exception by publishing a notice of 

the request in the Federal Register (see §411.362(c)(5)). We also stated that individuals and 

entities in the hospital’s community have 30 days to submit comments on the request. 

Community input must take the form of written comments and may include documentation 

demonstrating that the physician-owned hospital requesting the exception does or does not 

qualify as an “applicable hospital” or “high Medicaid facility,” as such terms are defined in 

§411.362(c)(2) and (3). Although we gave examples of community input, such as 

documentation demonstrating that the hospital does not satisfy one or more of the data criteria or 

that the hospital discriminates against beneficiaries of Federal health programs, we noted that 

these were examples only and that we will not restrict the type of community input that may be 

submitted (76 FR 74522). If we receive timely comments from the community, we will notify 

the hospital, and the hospital has 30 days after such notice to submit a rebuttal statement 

(§411.362(c)(5)(ii)). 

A request for an exception to the facility expansion prohibition is considered complete 

and ready for CMS review if no comments from the community are received by the close of the 

30-day comment period. If we receive timely comments from the community, we consider the 

request to be complete 30 days after the hospital is notified of the comments. If we grant the 

request for an exception to the prohibition on expansion of facility capacity, the expansion may 
 6 

occur only in facilities on the hospital’s main campus and may not result in the number of 

operating rooms, procedure rooms, and beds for which the hospital is licensed exceeding 200 

percent of the hospital’s baseline number of operating rooms, procedure rooms, and beds 

(§411.362(c)(6)). Our decision to grant or deny a hospital’s request for an exception to the 

prohibition on expansion of facility capacity will be published in the Federal Register in 

accordance with our regulations at §411.362(c)(7). 

III. Hospital Exception Request 

As permitted by section 1877(i)(3) of the Act and our regulations at § 411.362(c), the 

following physician-owned hospital has requested an exception to the prohibition on expansion 

of facility capacity: 

Name of Facility: Lake Pointe Medical Center 

Location: 6800 Scenic Drive, Rowlett, Texas 75088-4552 (Rockwall County) 

Basis for Exception Request: High Medicaid Facility 

 We seek comments on this request from individuals and entities in the community in 

which the hospital is located. We encourage interested parties to review the hospital’s request, 

which is posted on the CMS website at: http://www.cms.gov/Medicare/Fraud-andAbuse/PhysicianSelfReferral/Physician_Owned_Hospitals.html. We especially welcome 

comments regarding whether the hospital qualifies as a “high Medicaid facility.” Under 

§411.362(c)(3), a “high Medicaid facility” is a hospital that satisfies all of the following criteria: 

• The hospital is not the sole hospital in the county in which it is located; 

• The hospital does not discriminate against beneficiaries of Federal health care 

programs and does not permit physicians practicing at the hospital to discriminate 

against such beneficiaries; and 
 7 

• With respect to each of the 3 most recent fiscal years for which data are available as 

of the date the hospital submits its request, the hospital has an annual percent of total 

inpatient admissions under Medicaid that is estimated to be greater than such percent 

with respect to such admissions for any other hospital located in the county in which 

the hospital is located. 

We note that our regulations require the requesting hospital to use filed hospital cost 

report discharge data to estimate its annual percentage of total inpatient admissions under 

Medicaid and the annual percentages of total inpatient admissions under Medicaid for every 

other hospital located in the county in which the hospital is located. 

 Individuals and entities wishing to submit comments on the hospital’s request should 

review the “DATES” and “ADDRESSES” sections above and state whether or not they are in 

the community in which the hospital is located. 

IV. Collection of Information Requirements 

This document does not impose information collection and recordkeeping requirements. 

Consequently, it need not be reviewed by the Office of Management and Budget under the 

authority of the Paperwork Reduction Act of 1995 (44 U.S.C.35). 

V. Response to Public Comments 

We will consider all comments we receive by the date and time specified in the 

"DATES" section of this preamble, and, when we proceed with a subsequent document, we will 

respond to the comments in the preamble to that document.
Dated: May 6, 2014. 

 _________________________ 

 Marilyn Tavenner, 

 Administrator, 

 Centers for Medicare & Medicaid Services. 

[FR Doc. 2014-10872 Filed 05/09/2014 at 8:45 am; Publication Date: 05/12/2014]