By Brandon Schirg

On March 5, 2008, the U.S. House of Representatives passed H.R. 1424 (also known as the Paul Wellstone Mental Health and Addiction Equity Act of 2008), which mandates that health insurance policies offer equal health insurance coverage for mental and physical illnesses when the policy provides coverage for both.  In addition to addressing mental health insurance coverage, however, the legislation also contains a provision that would significantly amend the Whole Hospital Exception to the Stark Law.

As adopted by the House, the bill would prohibit a hospital from having any physician ownership unless on the date the legislation is enacted the hospital already had (i) physician ownership and (ii) a Medicare provider agreement in effect.  Like previously proposed amendments to the Whole Hospital Exception, the legislation would also prohibit physician-owned hospitals from increasing the number of their beds or operating rooms.  Physician ownership in the hospital would be limited to no more than 40 percent of the total value of the investment interests held in the hospital, with no individual physician being allowed to own more than 2 percent.  In addition, grandfathered hospitals would be required to disclose the fact that the hospital is partially owned by physicians on their web sites and in any public advertising.  These hospitals also would be required to submit an annual report to the Secretary of the Department of Health and Human Services that contains a detailed description of the hospitals’ physician owners and their ownership interests.

The Senate version of the bill (S. 588), which was passed on September 18, 2007, and is supported by the White House, does not contain the language amending the Whole Hospital Exception.  The two measures are now headed to a conference committee, which will attempt to resolve this and other differences between the bills.