March 19, 2004

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA 2003)(Public Law 108-173) altered the hospital and rural provider ownership exceptions to the physician self-referral prohibition. Prior to MMA 2003, the "whole hospital" exception allowed physicians to refer Medicare patients to a hospital in which they had ownership/investment interests, as long as the physicians were authorized to perform services at the hospital and their ownership or investment interests were in the hospital itself and not a subdivision of the hospital. Section 507 of MMA 2003 added an additional criterion to the whole hospital exception, specifying that for the 18-month period beginning on December 8, 2003 and ending on June 8, 2005, physician ownership and investment interests in "specialty hospitals" would not qualify for the whole hospital exception. Section 507 further specified that, for the same 18-month period, the exception for physician ownership or investment interests in rural providers would not apply in the case of specialty hospitals located in a rural area. In other words, for this 18-month period only, a physician may not refer a patient to a hospital in which he/she has an ownership or investment interest if the hospital is a specialty hospital, even if the specialty hospital is in a rural area.