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“Sets an Unfortunate Precedent” – FAH Reacts to CMS’ Decision Allowing a Physician Owned Hospital to Expand

FAH President and CEO Chip Kahn released the following statement after CMS weakened the Congressional ban on physician-owned hospitals (POH): 

“FAH is extremely disappointed by CMS’ decision to weaken the law banning new physician-owned hospitals (POH). This latest request to expand an existing POH exploits a regulatory loophole as an end run around Congress. The main campus and proposed new remote location are 55 miles apart, exposing this as a thinly veiled attempt to set up a new POH in a new service area. This decision sets an unfortunate precedent beyond South Texas as the law limits significantly the terms under which POHs can expand, much less build basically new hospitals.    

“We urge CMS to reverse the regulatory actions of the last Administration that removed the guardrails that are intended to prevent POHs from abusing the High Medicaid expansion exception and violating Congressional intent by building what are tantamount to new hospitals.” 


Doctors Hospital at Renaissance (DHR) based in Edinburgh, Texas received an exception to establish a new POH 55 miles away in Brownsville. 

In 2010, after a decade of reports on POHs by the OIG, GAO, CBO, and MedPAC highlighting, among other concerns, patient safety, cherry-picking, and excess utilization and spending from physician self-referral, Congress passed compromise legislation that banned new POHs. And to ensure continued access to care for Medicaid beneficiaries in the POH’s service area, the legislation established a “High Medicaid” exception that enabled limited expansion if they were the sustained, dominant Medicaid provider in their county.  

DHR clearly failed the test. The locations are 55 miles apart and DHR wasn’t even the highest Medicaid provider in the county where they wanted to set up shop. They took advantage of a recent regulatory loophole that removed the requirement that an expansion under the “High Medicaid” exception had to be on the main campus of the hospital. 

This decision establishes a new POH in a new service area, which is a clear violation of the law.