Significant reduction to hospital provider-based reimbursement looms for new, off campus sites

The Bipartisan Budget Act of 2015 (the Act), enacted November 2, 2015, will materially reduce reimbursement for new, off campus hospital outpatient departments (OPD), such as hospital-based clinics.

Currently, off campus provider-based OPDs are reimbursed under the Medicare Hospital Outpatient Prospective Payment System (OPPS). Under the Act, beginning on January 1, 2017, most items and services furnished by a new, off campus OPD will no longer be paid under the OPPS, but rather the lower reimbursed Medicare Physician Fee Schedule or Ambulatory Surgical Center Prospective Payment System (assuming the site is properly enrolled in Medicare and otherwise meets the requirements to receive payments under these alternative reimbursement systems).

There are important exceptions to this change:

Existing OPDs. The Act grandfathers provider-based OPDs that were billing under the OPPS prior to the date of enactment (November 2, 2015). Thus, the Act will not impact existing provider-based OPDs, but may impact new sites for which billing commences following enactment. However, the grandfathering provision does not correspond to the date that CMS will cease OPPS reimbursement for new, off-campus OPDs, creating an open issue for new OPDs that begin billing after the date of enactment, but before January 1, 2017.

On Campus OPDs. The Act will not apply to "on campus" OPDs. Under the Act, "on campus" is defined as either: (i) the physical area immediately adjacent to the provider's main buildings and other areas and structures that are not strictly contiguous to the main buildings, but are located within 250 yards of the main buildings; or (ii) within 250 yards from a remote location of a hospital facility (e.g., hospitals that furnish inpatient hospital services under the name, ownership, and financial and administrative control of the main provider). The Act expands the current definition of a hospital's "campus" to include OPDs located near remote locations of a hospital, which will limit the overall reach of the Act to some degree.

ED Services. The Act will not apply to items and services furnished by a dedicated emergency department, meaning either a department or facility of a hospital that: (i) is licensed by the state as an emergency department or emergency room; (ii) is held out to the public as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (iii) in the previous calendar year, provided at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment. Those items and services will continue to be reimbursed under the OPPS.

Regulatory guidance is needed to explain multiple open issues and implications under the Act. CMS indicated that it will release initial guidance on the Act in the CY2017 OPPS proposed rule, which should be issued very soon. Regardless of what the future holds, the Act is clearly a big step toward reimbursement neutrality and away from site of service billing, likely in response to increased consolidation within the industry and increased implementation of off campus provider-based sites in recent years. Consideration must also be given to how the Act could impact billing under Medicaid (to the extent the Medicaid program in a given state follows the Medicare provider-based standards, as in Ohio), as well as potential private payor arrangements. The Act may also impact 340B drug access (typically limited to provider-based sites), and we cannot say at this time whether the exceptions to the Act are actually permanent.

Not surprisingly, the Act has been met with criticism by hospitals and related industry groups (including the American Hospital Association). One of the biggest complaints is the inability to receive grandfathered status if the OPD was not billing before November 2, 2015. There are several reports of hospitals across the country that were days or months away from opening new off campus OPDs when the November 2 deadline hit. For those hospitals, significant time, energy, and resources were invested in these OPDs with the understanding that they would receive the higher reimbursement under the OPPS.

In an effort to remedy this situation, an amendment has been proposed in both the House and Senate that would protect off campus OPDs that were "under development" as of November 2, 2015. As proposed, the Secretary of the Department of Health and Human Services (the Secretary) will determine whether a particular off campus OPD was sufficiently "under development." Although the Secretary can establish any number of requirements for hospitals to prove that an OPD was "under development," the proposed amendment includes requirements such as the completion of architectural plans or the receipt of necessary approvals from appropriate State agencies. Importantly, both amendments have stalled in their respective House and Senate Committee with no movement on either since December 2015.

However, the House recently passed, and the Senate is currently considering, the Helping Hospitals Improve Patient Care Act of 2016 (the "HHIPCA") in an acknowledgment of and attempt to correct issues created by the Act's site-neutral payment policy. Supported by the American Hospital Association-supported, HHIPCA would allow an off campus OPD to be eligible for the higher OPPS payments throughout 2017 if the main hospital submitted to CMS a voluntary provider-based attestation (pursuant to 42 C.F.R. 413.65), before December 2, 2015, indicating that the OPD construction was complete or ready/nearly ready to render treatment to patients.

Additionally, HHIPCA provides that outpatient department locations that had a binding, written agreement with an outside unrelated party for the actual construction of the off campus OPD before November 2, 2015 are excepted from the site-neutral payment policy for services rendered on or after January 1, 2018. This additional exception requires the main hospital to:

• File a provider-based attestation for the new off-campus outpatient department before December 31, 2016;

• Submit a certification to CMS within 60 days of the date HHIPCA is enacted that the hospital had a binding, written construction agreement with an outside unrelated party related to the OPD in place before November 2, 2015; and

• Add the off-campus outpatient department to the main hospital's Medicare enrollment form.

While this proposed legislation has not yet passed the Senate, it is important to note the deadline of December 31, 2016 for submission of the provider-based attestations. This second exception is not available for hospitals until 2018; thus, hospitals that are unable to fall under the first exception for 2017 would be subject to lower reimbursement until January 1, 2018.

The third exception to the site-neutral payment policy applies to off-campus OPDs of certain cancer hospitals. Here, cancer hospitals would have to file provider-based attestations within 60 days of the date HHIPCA is enacted for off-campus OPDs that met or will meet provider-based requirements between November 2, 2015 and the date HHIPCA is enacted. Alternatively, if the OPD will not be completed in time to meet this first deadline, the cancer hospital may file a provider-based attestation within 60 days of the date of meeting the provider-based requirements.

While the HHIPCA potentially offers some relief from the changes included in the Act, it still leaves many unanswered questions under the Act. For example, it remains unclear whether reimbursement will be impacted when a grandfathered off-campus OPD relocates, expands services, or experiences a change in ownership.

Hospitals find themselves cautiously optimistic that these legislative changes and implementing regulations will provide some reprieve under the Act, at least for mid-build off campus OPDs and cancer hospitals, and clarify whether changes, such as new ownership or relocation, will jeopardize an OPD's grandfathered status. In the meantime, at least some hospitals and health systems appear to be slowing new development of OPDs and rethinking planned changes to existing ones. One can only speculate at this point on how this payment change will ultimately impact hospital service expansion.

While the Act is understandably creating significant concern within the hospital community and elsewhere (including the real estate community), it also serves as a stark reminder to hospitals to periodically audit their existing provider-based sites to ensure continued compliance with Medicare's many operational, financial, and administrative integration requirements. Vorys has developed several tools to audit provider-based compliance for existing sites and to design and implement new provider-based sites in compliance with current law. A provider's failure to engage in such a review, or its failure to return amounts which may have been paid in error due to incorrect site-of-service billing, could have very serious compliance consequences, including the potential loss of Medicare enrollment and staggering financial consequences under the federal False Claims Act. Thus, hospitals are encouraged to examine existing provider-based sites to ensure continued receipt of the higher reimbursement rate.

Jolie is a partner in the Vorys Columbus office and the chair of the health care group. She practices throughout the country, with a focus on health care compliance and provider reimbursement, in the context of creation of new provider sites; mergers, acquisitions, and other industry consolidation and integration models; and expanding provider operations. Jolie has counseled adult and children's hospitals, physicians, pharmacies and pharmacy benefit managers, home health agencies, ambulatory surgery centers, diagnostic centers, and faculty practice plans on legal issues involving:

• Payer enrollment, registration, licensure, and accreditation;

• Medicare and Medicaid billing, coding, documentation, coverage, and reimbursement, including obtaining provider-based status for both on-campus and off-campus facilities;

• Compliance with federal and state fraud and abuse laws, including the federal Anti-Kickback Statute, the federal Stark Physician Self-Referral Laws, the federal False Claims Act, and related government investigations and audits before the Centers for Medicare and Medicaid and their contractors, as well as the Department of Justice and the Office of the Inspector General;

• Teaching physician and non-physician practitioner supervision and billing;

• Managed care contracting and provider network participation and management, including the creation and operation of physician-hospital organizations (PHOs);

• Other health care laws, including the Health Insurance Portability and Accountability Act (HIPAA) and the Emergency Medical Treatment and Active Labor Act (EMTALA); and

• Professional disciplinary actions.

Jolie also advises employers and group health plans in all industries on compliance issues related to the Employment Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Uniformed Services Employment and Reemployment Rights Act (USERRA), HIPAA privacy, security and portability, electronic health records, Medicare Part D, and Medicare secondary payer and coordination of benefits issues. Jolie routinely negotiates contractual arrangements with third party administrators and pharmacy benefit managers and drafts plans documents and related participant communications.

Jolie regularly speaks both nationally and locally on health care reimbursement and compliance as well as health care reform policy and compliance, and publishes often on the subjects.

Jolie is a member of the American Health Lawyers Association and the Society of Ohio Healthcare Attorneys.

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.​

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