Final Rules on Reimbursement for Off-Campus Provider-Based Departments
By: Michael Schulze, Isabel Bonilla-Mathé

On Nov. 2, 2015, Congress surprised providers with the passage of Section 603 of the Bipartisan Budget Act of 2015 (the “Act”), which eliminates Medicare Outpatient Prospective Payment System (OPPS) reimbursement for off-campus outpatient provider-based departments (off-campus PBEs) established post enactment of the new law. The Act discontinued the favorable reimbursement received by off-campus PBEs, providing instead for site neutral payments. Beginning Jan. 1, 2017, this “site neutral” Medicare reimbursement will apply to any off-campus PBE that was not billing as an off-campus PBE prior to Nov. 2, 2015. Off-campus PBEs in existence prior to Nov. 2, 2015, are “grandfathered” and are exempted from the new site neutrality payments.
On July 6, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a set of proposed rules implementing the Act. A few months later, on Nov. 1, 2016, the much awaited final rules were published, along with an interim final rule with comment period to establish a payment mechanism under the Medicare Physician Fee Schedule (MPFS) for non-exempt PBEs. The following provides a brief overview of some of the main provisions of the final rules. However, there is no doubt that compliance guidance for off-campus PBEs will evolve as these regulatory changes will require additional rulemaking and further guidance from CMS.

Grandfathered Status Based on Date of Service: The final rule reiterated that provider-based off-campus outpatient clinics established prior to Nov. 2, 2015, will continue to receive OPPS reimbursement, whereas clinics established after that date will receive site neutral payment. In the proposed rules, CMS stated that only off-campus PBEs that had billed items and services under OPPS prior to Nov. 2, 2015 would be grandfathered. In the final rules, CMS adopted a more flexible approach by grandfathering off-campus PBEs that had furnished items or services with dates of service prior to Nov. 2, 2015 and timely billed for those services under OPPS.

No Under Development Exception: CMS declined to create an exception that would grandfather off-campus PBEs that were under development and permit them to that seek OPPS reimbursement, since such facilities would not have been furnishing services prior to Nov. 2, 2015. As CMS had indicated in the proposed rules, CMS again noted in the final rule that it did not believe the Act granted the agency with the authority to create an exception for off-campus PBEs that may have been under development.

New Rule Does NOT Apply to Services Furnished in an Emergency Department: Contrastingly, emergency departments, which are expressly exempted in the Act, are not subject to the prohibition on OPPS payment. In the final rule, CMS interpreted the express exemption as providing that that all services rendered in an emergency department setting, even if not an “emergency service,” will receive OPPS reimbursement.

New Rule Does NOT Apply to Critical Access Hospital PBEs: CMS’s final rules do not impact payments to critical access hospitals (CAHs) operating off-campus PBEs. Section 603 of the Act passed Nov. 2, 2015 ONLY affects payments made under Section 1833(t) of the Social Security Act (SSA). Because CAHs are paid for outpatient services under Section 1834(g) of the SSA, the exclusion does not apply to CAH off-campus PBEs. Accordingly, CAHs can continue to establish off-campus departments on or after Nov. 2, 2015 as long as the new CAH off-campus PBEs comply with any CAH related requirements, including distance from the CAH and from other hospitals and CAHs as required by 42 C.F.R. § 485.610(e).

New Rule MAY not apply to Rural Health Clinics: The final rules published by CMS did not address provider-based rural health clinics (RHC). Like CAHs, RHCs are not subject to the Section 603 exclusion from OPPS. RHCs are separately enrolled and certified providers under the Medicare program. Thus, like CAHs, RHCs are not paid under the OPPS, and Section 603 and the final rules implementing the same, should not affect the payment for RHC services. However, it should be noted that CMS did not clarify how it would treat hospital-based outpatient services provided by RHCs.

Additional Services Not Prohibited: Yet another issue addressed by the final rules was how CMS was going to treat service expansion by grandfathered off-campus PBEs. In the proposed rules, CMS took the position that off-campus PBEs would be exempted only for the types of items and services included in any of the 19 “clinical families” the provider had been providing prior to Nov. 2, 2015. In the final rule, CMS declined to implement the proposed rule, agreeing with commentators that it would be too complex to administer. Instead, an excepted off-campus PBE “will receive payments under the OPPS for all billed items and services, regardless of whether it furnished such items and services prior to the date of enactment.” CMS stated it will monitor billing data and may consider a mechanism to limit service expansion, either by placing a limitation on volume, as suggested by commentators, or a limitation on lines of service, as was contemplated in the proposed rule.

Expanding or Moving Location IS Prohibited – Normally: While expanding service lines may not jeopardize the grandfathered status of an entity’s off-campus PBE, relocating or expanding the size of the off-campus PBE location will, absent extraordinary circumstances. CMS stated in the final rule that grandfathered off-campus PBEs will lose their excepted status if they expand or relocate from the physical address and suite number listed on the locations’ provider enrollment form. CMS will only permit excepted locations to relocate for extraordinary circumstances. Although the final rules provided examples of “extraordinary circumstances,” such as natural disasters, or significant public health and safety issues, CMS declined to provide an exhaustive list, preferring to evaluate exceptions to the relocation prohibition on a case-by-case basis.

Change of Ownership May Jeopardize Grandfathered Status: If a hospital sells one of its off-campus PBE locations, the grandfathered status of that location will not transfer to the new provider. Hospitals considering a change of ownership (CHOW) should be aware that the potential sale could cause the hospital to lose grandfathered status of its off-campus PBEs. This can be avoided, however, if the new owner accepts the hospital’s provider agreement. This can also be avoided if the purchaser avoids a CHOW altogether by acquiring the membership units or shares in the entity that owns the hospital.

CMS to Cut Payments to Non-Grandfathered PBEs: While CMS has yet to figure out the logistics and payment mechanisms necessary to implement the payment system for non-grandfathered PBEs, CMS did provide some clues in the final rule. CMS stated that starting Jan. 1, 2017, payments would be processed through the MPFS and set at “50 percent of the OPPS rate for each nonexcepted item or service with some exceptions.” CMS admitted that it had no mechanism to pay providers in 2017 for nonexcepted services and solicited public comments regarding the proposed system. CMS stated that providers will be able to bill nonexcepted services on an institutional claim with a “PN” modifier, which will trigger payment under the new MPFS payment rates. Furthermore, CMS will pay hospitals directly for these nonexcepted services, as a means of addressing commentator’s concerns regarding issues such as “incident to” billing, and the application of the fraud and abuse laws.

2016 1130 Final Rules on Reimbursement for Off-Campus Provider Based Departments.” Louisiana Hospital Association Impact Law brief, Volume 31, (No. 8). Co-written with Isabel Bonilla-Mathe.