Many Questions Left Unanswered in the Wake of Long-awaited CMS Proposed Rule Regarding Off-Campus Provider-Based Departments

Many Questions Left Unanswered in the Wake of Long-awaited CMS Proposed Rule Regarding Off-Campus Provider-Based Departments


Late last week, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule intended to prohibit hospitals operating certain off-campus provider-based departments (PBDs) from billing under the Outpatient Prospective Payment System (OPPS). In an effort to implement Section 603 of the Bipartisan Budget Act of 2015, CMS says the proposed rule will save about $500 million a year by refocusing payments on the patient rather than the clinical setting.  Noting that OPPS payments to PBDs have created a payment differential wherein “Medicare pays for the same services at a higher rate if those services are provided in a hospital outpatient department, rather than a physician’s office,” CMS intends this rule to close that gap.

Despite CMS’ laudatory statements regarding the proposed rule, many providers have serious concerns about the proposals.  Under the rule, off-campus PBDs that began billing Medicare under the OPPS on or after November 2, 2015 will no longer be paid for services under the OPPS as of the date the rule is expected to go into effect January 1, 2017.  Instead, these off-campus PBDs will be required to seek payment through physicians and other providers, under the Medicare Physician Fee Schedule (MPFS)—a situation which presents its own set of potential regulatory concerns—until a more suitable payment method can be implemented in 2018.

As proposed, the rule will not apply to all PBDs.  PBDs located on the campus of a hospital within 250 yards of a remote location of the hospital, satellite facilities, and provider-based entities, such as rural health clinics, will continue to receive payments under the OPPS.  In addition, dedicated emergency departments are expressly exempt from the rule.  Finally, all off-campus PBDs that were billing for covered services prior to November 2, 2015 would be grandfathered in or “excepted,” allowing them to continue to bill under the OPPS, so long as certain conditions are met. These excepted off-campus PBDs may only continue to receive payment under the OPPS so long as they remain in the same location, do not expand operations beyond services in the same clinical family as those provided by the PBD on November 2, 2015 and remain under the ownership of the same hospital and subject to the same Medicare provider agreement.

Each of the above limitations merits further exploration.  In its commentary to the proposed rule, CMS expressed concern that an excepted off-campus PBD may seek to expand its excepted practice by moving to a larger location, purchasing additional physician practices, and incorporating these physician practices into the new location.  In order to avoid these results, the rule prohibits an excepted PBD from relocating. An excepted PBD that does relocate for any reason, even to a different unit or suite number at the same address, would lose its excepted status and the ability to receive payment under the OPPS system.  CMS is currently seeking comment as to whether a limited relocation exception should be adopted where relocation is forced by circumstances outside of the excepted PBD’s control, such as a natural disaster. 

In addition to the restriction on relocation, excepted PBDs are prohibited from billing under the OPPS for services from a service type that the excepted PBD did not furnish prior to November 2, 2015.  CMS defines these services types through a table of 19 different clinical families of hospital outpatient services, including: advanced imaging, clinical oncology, diagnostic tests, general surgery, ophthalmology, pathology, urology, and others.  Although an excepted PBD could continue to bill under the OPPS for any services it billed prior to November 2, 2015, any services from a new clinical family would have to be billed under the MPFS and could not be billed through the hospital until CMS develops an appropriate payment mechanism.

The rule also proposes that a PBD can retain excepted status under a change of ownership only where the main provider changes ownership or merges and the Medicare provider agreement is accepted by the new owner. Excepted status shall be revoked, however, where only ownership of the PBD changes hands.  Each of the above restrictions on excepted PBDs stifles opportunities for the facilities to grow and develop if they are to retain the right to bill under the OPPS. 

The most significant source of backlash from the industry lies in the fact that the proposed rule removes the ability of off-campus PBDs to bill under the OPPS without providing an alternative payment mechanism.  As the proposed rule currently stands, the sole method for an off-campus PBD to receive Medicare payment is through employed or contracted physicians working at the facilities and billing under the MPFS.  Although CMS has stated that it hopes to provide alternative billing methods for PBDs by 2018, this gap leaves providers in something of a quandary for the 2017 calendar year.  Attempting to seek payment for the facilities from employed or contracted physicians presents its own set of concerns, while at the same time, CMS has stated that it is not currently equipped to provide payment to PBDs by any other means.  The rule addresses the possibility that an off-campus PBD could seek enrollment as another provider type, such as an ASC or physician group practice in the interim, but the realities of Medicare enrollment are such that this may not be a viable option for many providers. 

 Comments to the proposed rule are due by 5:00 p.m. EDT, September 6, 2016, and the final rule is expected to be announced no later than November 1, 2016.  Waller attorneys are available to aid stakeholders in drafting commentary to the proposed rule.

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