CMS Confirms Relocation of Physician-Owned Hospital Does Not Jeopardize Stark Law Exception
CMS's Advisory Opinion — the first issued since 2021 — provides noteworthy guidance and important considerations for hospital administrators, compliance officers, and legal counsel of physician-owned hospitals currently taking advantage of the exception considering structural changes or expansions.
Highlights
The Centers for Medicare & Medicaid Services (CMS) recently released Advisory Opinion No. CMS-AO-2025-1, addressing whether a physician-owned hospital’s proposed full-site relocation and addition of an emergency department would jeopardize its ability to continue to rely on the Stark Law’s “whole hospital exception.” In the advisory opinion, CMS concluded that relocation, by itself, is not necessarily disqualifying — and that no single factor is dispositive. Instead, the agency took a holistic approach in assessing whether the hospital remained the same entity post-relocation for purposes of the exception.
By retaining the same ownership, provider agreement, licensure, services, name, patient base, and bed count, CMS concluded that the hospital would remain the “same hospital” under Stark requirements and continue to qualify under the “whole hospital exception”— enabling the hospital to retain its protection for physician referrals.
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