The Deficit Reduction Act of 2005 (DRA) required the Secretary of HHS to submit a report to the Congress addressing physician ownership in hospitals. In the report, the Centers for Medicare and Medicaid Services (CMS) stated that pursuant to 42 CFR § 411.361, hospitals would be required to provide information on a periodic basis concerning their ownership/investment interests and compensation relationships with physicians. Accordingly, CMS created the Disclosure of Financial Relationships Report (DFRR), which is a mandatory disclosure of information regarding financial relationships between hospitals and physicians, for purposes of compliance with the physician self-referral statute and regulations.

Section 6001 of the Patient Protection and Affordable Care Act (PACA) also establishes additional requirements (in new section 1877(i) of the Social Security Act) for hospitals to qualify for exceptions to the ownership or investment prohibition. Among other requirements, Section 6001 of the PACA limits expansion to hospitals that have physician ownership or investment and mandates certain disclosure obligations for physician-owned hospitals and referring physicians that have an ownership or investment interest in a hospital.

CMS has recently determined that mandating hospitals to complete the DFRR may duplicate certain reporting obligations related to physician ownership and investment set forth in Section 6001 of the PACA. As such, CMS has decided to delay implementation of the DFRR, and instead focus on implementation of Section 6001 of the PACA. Accordingly, this represents a shift in current focus by CMS to physician ownership interests. CMS has indicated that it will re-visit the necessity to collect information regarding physicians’ compensation relationships after it collects and examines the ownership information.