On May 19, 2015, the Subcommittee on Health of the House of Representatives Committee on Ways and Means, chaired by Kevin Brady (R-TX), held a hearing titled Improving Competition in Medicare: Removing Moratoria and Expanding Access. The hearing was the first in a series for the summer that is intended to identify solutions to improve competition within the Medicare program. Much of the testimony centered around whether the current expansion moratorium imposed on physician-owned hospitals should be lifted. Republican lawmakers generally supported easing the restrictions on expansion and asserted that the current framework is reducing competition in health care. Throughout the hearing, Democratic committee members showed opposition to lifting the expansion moratorium.


Among other rules imposed on physician-owned hospitals, the Affordable Care Act amended the Stark Law such that physician-owned hospitals are prohibited from expanding the aggregate number of operating rooms, procedure rooms or licensed beds beyond the number for which a particular hospital was licensed on March 23, 2010. The Secretary of Health and Human Services may grant an exception to this limitation for physician-owned hospitals that qualify as an applicable hospital or a high Medicaid facility. To date, only two hospitals have satisfied the criteria necessary for expansion and made it to the public notice and comment phase of the exception request process.


Those testifying on the current moratorium included a representative of the American Hospital Association (“AHA”) and the president of a physician-owned hospital currently serving as a representative of Physician Hospitals of America (“President”).

The AHA, which has nearly 5,000 member hospitals and health systems, strongly opposed lifting the moratorium. AHA’s representative testified that physician-owned hospitals cherry-pick the most profitable patients, provide limited or no emergency services and increase the utilization of health care services through self-referrals.  In further support of continuing the moratorium, the AHA also emphasized that the Office of Management and Budget scored the Stark Law expansion prohibition as being expected to reduce the federal deficit by $500 million by the year 2020.

In support of lifting the moratorium, the President testified that many physician-owned hospitals are outgrowing their facilities and are faced with either: (i) leaving the Medicare program so they can expand to accommodate growing numbers of inpatients; or (ii) remaining a Medicare provider and having to turn away those who cannot be served due to capacity constraints. To refute the points made by the AHA, the President noted that Medicare requires hospitals to comply with the Emergency Medical Treatment and Active Labor Act but does not require that hospitals have an emergency department. Additionally, all hospitals, regardless of ownership, make decisions on which services to provide based in part on financial sustainability. Finally, the President testified to the fact that acute care hospitals have been rapidly consolidating practices, employing physicians and implementing medical directorships, all of which contribute to increased health care costs.

Practical Takeaway

This was the first in a series of hearings to be held in the summer and fall of 2015 to identify potential ways to preserve the long-term stability and integrity of the Medicare program.  Interested parties may submit written statements to be included with the official hearing record by emailing waysandmeans.submissions@mail.house.gov on or before the close of business on June 1, 2015.

Special thanks to Maryn Wilcoxson, law clerk, for her assistance with the preparation of this Health Law News article.