CMS releases rules to implement site-neutral Medicare payments for certain provider-based departments starting January 1, 2017

The Centers for Medicare and Medicaid Services (CMS) on Tuesday, November 1, 2016, moved forward with the adoption of a site-neutral Medicare payment policy for non-excepted (non-grandfathered) items and services provided at certain off-campus provider-based departments (PBDs). CMS provided the guidance as part of the final rule on the Medicare Hospital Outpatient Prospective Payment System (OPPS).

The final rule is scheduled to be published in the Federal Register on November 14, 2016.

Regulations consider PBDs “off-campus” if they are not within 250 yards of the main hospital building or a remote location of a hospital facility. Federal regulations define “remote location of a hospital” as “a facility or an organization that is either created by, or acquired by, a hospital that is a main provider for the purpose of furnishing inpatient hospital services under the name, ownership, and financial and administrative control of the main provider.”1 In addition, federal regulations state that “the Medicare conditions of participation do not apply to a remote location of a hospital as an independent entity.”

The American Hospital Association has voiced support for legislation (H.R. 5273, the Helping Hospitals Improve Act) currently before the Congress that would expand the grandfather clause of the provision2. It remains to be seen whether the Senate will take action on the bill, which the House passed this summer with bipartisan support. Congress is scheduled to reconvene on Monday, November 14, 2016, after the elections.

Background

The site-neutral payment policy was included in the Bipartisan Budget Act of 2015 in an effort to eliminate the incentive for hospitals to acquire physician practices, convert the practices to PBDs, and receive higher Medicare payments. CMS estimates that the policy will reduce Medicare spending by $500 million in 2017.

Items and services furnished at off-campus PBDs are billed using Healthcare Common Procedure Coding System (HCPCS) codes and paid under OPPS. In addition, physician (professional component) services at off-campus PBDs are eligible for payment under the Medicare Physician Fee Schedule (MPFS) facility rate.

Under the new policy, off-campus PBDs that were not billing Medicare for covered services furnished prior to November 2, 2015 (the date of enactment for the Bipartisan Budget Act of 2015) generally will not be eligible for payments under OPPS effective January 1, 2017.

Excepted status

The policy will not apply to excepted (grandfathered) off-campus PBDs, i.e., off-campus PBDs that were billing Medicare for covered services furnished prior to November 2, 2015. However, an excepted off-campus PBD that relocates (with limited exceptions for extraordinary circumstances) could lose its excepted status. In addition, an excepted off-campus PBD that changes ownership will maintain its excepted status only if the new hospital owners acquire the entire hospital to which the PBD is provider-based and adopt the existing Medicare provider agreement.

The final rule states that as CMS and its contractors audit hospital billings, the agency will expect hospitals to “maintain proper documentation showing which individual off-campus PBDs were billing Medicare prior to November 2, 2015, and to make this documentation available … upon request.”

The site-neutral payment policy will not apply to dedicated emergency departments.

CMS is not finalizing the proposed policy to limit service line expansion to only those clinical families of services billed prior to November 2, 2015.  Therefore, due to public comment, an excepted off-campus PBD will receive payments under OPPS for all billed items and services, regardless of whether these services were provided prior to enactment date. However, CMS plans to monitor service line growth and might propose to adopt a limitation on the on the expansion of services or service lines in future rulemaking.

Citing the statutory language, the final rule does not extend excepted (grandfathered) status to mid-build or under development off-campus PBDs.

MPFS rates for nonexcepted items and services

CMS included with the final OPPS rule an interim final rule designating new rates under the Medicare Physician Fee Schedule for nonexcepted items and services furnished at off-campus PBDs that no longer can be billed under OPPS. Nonexcepted items and services will be billed on the institutional claim (UB-04 claim form) using the new claim line modifier “PN” to indicate that the item or service is nonexcepted. CMS considers these rates to be site-of-service specific rates for the technical component of MPFS services.

CMS is using a reimbursement rate that is 50% of the corresponding OPPS rate for each nonexcepted item and service, with some exceptions, as the interim technical component of MPFS services for items or services furnished at a nonexcepted PBD.

This payment policy based on MPFS rates is intended to be temporary for calendar year 2017 while CMS explores other options and weighs public comment. CMS is accepting comment on the interim final rule through December 29, 2016. The agency may make adjustments to the payment mechanisms and rates through rulemaking that could be effective in 2017.

Authors:

Anne Phelps
Principal | Deloitte Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Lloyd Haggard
Deloitte Advisory Managing Director
Deloitte & Touche LLP

Gordon Sanit
Deloitte Advisory Managing Director
Deloitte & Touche LLP

Daniel Esquibel
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

Heather Hagan
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

1Code of Federal Regulations Section 413.65(a)2
2American Hospital Association Letter to Members of Congress, October 27, 2016, http://www.aha.org/advocacy-issues/letter/2016/161027-let-legpriorities-house.pdf

 

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