The Controversy – 2012 Rulemaking Attempts

Roughly two years ago, the Centers for Medicare and Medicaid Services of the Department of Health and Human Services (“CMS”) published final regulations announcing two controversial rule changes addressing hospital governance.  The industry was taken by surprise, to say  the least, as neither of these requirements had been in the proposed rule.  The changes, promulgated as amendments to the Governing Body Condition of Participation (CoP) included (i) the requirement that a hospital’s board include at least one member of its medical staff; and (ii) a statement in the preamble interpreting 42 C.F.R. § 482.22 to require that each hospital within a multi-hospital system have a separate, independent medical staff.  77 Fed. Reg. 29034, May 16, 2012. A groundswell of opposition arose immediately, led by the American Hospital Association, on both the procedural side, as the issues had not been vetted through a proposed rule, and substantively as well.  The American Medical Association supported the changes.  CMS quickly concluded that it needed additional time to evaluate these issues, and on June 15, 2012 issued an instruction to State Survey Agency Directors that placed the requirement to include members of the medical staff on the hospital’s governing body on hold until CMS had addressed the issue “completely” and indicated that in the interim neither the amended CoP nor the interpretation would be implemented. At that point we opined that it would “be quite some time before these issues will resurface.”  Our prior blog post on these issues can be found here.

CMS Addresses Stakeholder Concerns

Medical Staff Representation on Hospital Board

Almost two years to the day after that aborted rulemaking, CMS responded to the concerns that had been raised.  On May 7, 2014, pursuant to President Obama’s Executive Order 13563, “Improving Regulations and Regulatory Review” (Jan. 18, 2011), CMS issued Medicare and Medicaid Programs; Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction; Part II (Final Rule) which, among other things, revisited these CoP governance issues.  The heretofore unenforced requirement that a hospital’s governing body include a physician from its medical staff has been removed.  CMS remains committed, however, to the importance of the medical staff perspective on the quality of care being heard by a hospital’s governing body.  It thus replaced that requirement with a new provision in the “Medical Staff” standard of the governing body CoP that requires a hospital’s governing body to directly consult periodically throughout the year with the individual responsible for the organized medical staff of the hospital, or his or her designee. 42 C.F.R. § 482.12(a)(10). While CMS intends to leave some flexibility in implementation of this requirement to the hospital, it expects that such communications would be of an appropriate type and would occur at least twice a year, the type and frequency based upon such factors as (i) the scope and complexity of the services offered; (ii) the patient population served; and (iii) any issues that the institution’s performance improvement and quality assessment program might identify.  Direct consultation means that the governing body or a committee thereof engages in “immediate, synchronous communication,” either in person or through telecommunication.  For a multi-hospital system using a single governing body to oversee multiple hospitals, the governing body must consult directly with the individual responsible for the organized medical staff (or designee) of each hospital within its system. Of course, CMS also expects to see evidence that the governing body is appropriately responsive to any requests for timely (i.e. unscheduled) consultations.

Medical Staff in a Multi-Hospital System

Regarding the structure of the medical staff in a multi-hospital system, CMS has reinterpreted 42 C.F.R. § 482.22 to allow for either (i) a unique medical staff for each hospital (which CMS had previously considered to be the requirement, despite the recent trend to the contrary); or (ii) a unified and integrated medical staff shared by multiple hospitals within a hospital system.  CMS was provided with no evidence to indicate that having a “separate medical staff for each hospital within a system was inherently superior to the unified and integrated model.”  Indeed, in changing its interpretation, CMS cited some evidence that unified medical staffs contribute to improved patient care quality achievements, perhaps due to the enhanced ability of an integrated medical staff to standardize best practices and implement quality improvements.

At the same time, CMS revised § 482.22(b) to add the following requirements for the establishment of such unified medical staffs:  (i)  that the medical staff members holding privileges at each hospital in the system be advised of their rights to, and have voted either to participate in a unified and integrated medical staff structure or to maintain a hospital-specific separate and distinct medical staff for their respective hospital; (ii) that the unified and integrated medical staff have bylaws, rules, and requirements that describe its processes for self-governance, appointment, credentialing, privileging, and oversight, as well as its peer review policies and due process rights guarantees; (iii) that the unified and integrated medical staff be established in a manner that takes into account each hospital’s unique circumstances, and any significant differences in patient populations and services offered in each hospital; (iv) that the unified and integrated medical staff give due consideration to the needs and concerns of members of the medical staff, regardless of practice or location;  and (v) that there are mechanisms in place to ensure that issues localized to particular hospitals are appropriately considered and addressed.

Conclusion

CMS has clearly listened to its major constituents in this regard, and has devised sound resolutions to complex problems.  The new rules take effect on July 11, 2014, so the process for drafting and implementing appropriate institutional and medical staff bylaw amendments should begin immediately.