Published on July 14, 2016, CMS’s proposed 2017 Hospital Outpatient Prospective Payment System (OPPS) rule calls for site-neutral payments that would stop Medicare payments to many off-campus facilities at the same level as payments to hospital-based departments.

In its commentary to the proposed rule, CMS notes the dramatic trend in recent years toward hospital acquisition of physician practices and the integration of those practices into hospital departments has resulted in higher Medicare payments and beneficiary cost-sharing. The higher payments are due to Medicare’s payment of two separate claims for services provided in an off-campus department of a hospital – one under the OPPS for institutional services, and one under the Medicare Physician Fee Schedule (MPFS) for professional services. In its news release, CMS indicated that these higher payments made to hospital-owned facilities have been a long-standing concern of HHS’s Office of Inspector General, the Medicare Payment Advisory Commission, and members of Congress.

In the Bipartisan Budget Act of 2015 (the Budget Act), Congress amended the OPPS statute to provide that as of January 1, 2017, applicable items and services furnished by certain off-campus outpatient departments of a hospital will not be considered a covered hospital outpatient provider-based department (PBD) service for purposes of payment under the OPPS. Such items and services will instead be paid “under the applicable payment systems” under Medicare Part B. The Congressional Budget Office estimated program savings of approximately $9.3 billion over a ten year period due to this provision alone.

The Budget Act exempted from these new requirements any such off-campus outpatient departments existing prior to the Budget Act’s enactment on November 2, 2015, but only for the same types of items and services they had furnished and billed under the OPPS prior to that date. In light of the perceived Congressional intent to curb hospitals’ acquisition of physician practices, CMS has proposed in the new rule this exception only applies to existing off-campus departments as of that date, but not to any relocation to another location or even to another suite or unit in the same building.

Specifically, CMS proposes to exempt from this new rule off-campus outpatient departments items and services provided at one of these three locations, which would continue to be paid under OPPS: (1) a dedicated emergency department that meets one of several requirements; (2) on-campus locations, using the current definition of “campus;” and (3) departments at or within 250 yards of a “remote location” that have been recognized to have provider-based status. Further, CMS proposes to limit the exception for off-campus programs billed under OPPS to items and services part of one or more of 19 “clinical family of services” of hospital outpatient service types named in the rule (see 81 Fed. Reg. at 45685), if they have been furnished on site and billed prior to November 2, 2015. Consequently, a hospital under the proposed rule could not expand the services provided at excepted off-campus outpatient PBDs and continue to bill under OPPS.

CMS proposes that an off-campus hospital outpatient PBD may be transferred and continue to bill under OPPS only if the ownership of the main hospital or provider is also transferred and the Medicare provider agreement is accepted by the new owner. If the provider agreement is terminated, off-campus PBDs that bill under OPPS would no longer be excepted. Individual, excepted off-campus PBDs may not be transferred from one hospital to another (without transferring the main hospital) and retain their excepted status.

Because CMS does not currently have a mechanism to pay the off-campus PBD for nonexcepted items and services (other than OPPS), CMS proposes that for the year beginning January 1, 2017, nonexcepted items and services at off-campus PBDs will be paid under the MPFS at the nonfacility rate, and no separate facility payment will be made. CMS is soliciting public comments for a new payment system other than OPPS to be used by off-campus PBDs beginning January 1, 2018, to bill for nonexcepted items and services. This new system may or may not include a payment for facility services.

CMS’s proposals have been met by sharp responses from hospital groups, who have criticized the limitations imposed on new off-campus hospital PBDs and on relocating or building new outpatient facilities. Critics believe these steps will seriously undermine hospitals’ ability to provide care to underserved communities. CMS has solicited public comments on many elements of its proposals, including:

  • Whether it should adopt a limited relocation exception process for natural disasters and other specific, extraordinary circumstances beyond the hospital’s control;
  • Whether it should require hospitals to separately self-report the items and services furnished by each off-campus outpatient PBD, the date it began billing for those services, and the clinical families of services provided there prior to that date;
  • The 19 proposed “clinical families of services” that may continue to be billed under OPPS, if other requirements are met;
  • Whether CMS should adopt a specific time period within which the prior items and services had to be billed in order to be exempted;
  • Whether CMS should also limit the volume of services furnished within a clinical family of services for which the hospital was billing prior to November 2, 2015;
  • The impact of other billing rules, fraud and abuse laws, and other statutes, rules and provisions on these proposals; and
  • The changes needed to enrollment forms, claim forms and hospital cost reports, among other operational changes.

The deadline for submitting comments to CMS on the draft rule is September 6, 2016.

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