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CMS Finalizes Site-Neutral Payment Regulations for Off-Campus Provider-Based Departments of Hospitals

Publications | December 8, 2016

In July we notified clients regarding CMS’ proposed rule interpreting Section 603 of the Bipartisan Budget Act of 2015, which amended the Hospital Outpatient Prospective Payment System (OPPS) statute at section 1833(t) of the Social Security Act. Recently, CMS released the CY 17 OPPS Final Rule (Final Rule) published November 14, 2016 in the Federal Register (81 Fed. Reg. 79562). The Final Rule interprets and finalizes applicable items and services (to be defined by CMS as discussed below) furnished by certain off-campus provider-based departments (HOPBDs) on or after January 1, 2017, which will not be paid under the OPPS as covered outpatient department services and will instead be paid under the applicable payment system (the Medicare Physician Fee Schedule), provided the requirements for such payment are otherwise met. Certain HOPBDs are excepted from this prohibition, including, (i) off-campus PBDs that were billing under the OPPS with respect to covered outpatient department services prior to November 2, 2015, (ii) dedicated emergency departments (DEDs), (iii) on-campus PBDs, (iv) those PBDs "within the distance" of a remote location of a hospital facility and (v) those additional items recently added by subsequent Congressional action (see Recently Passed Legislation below). We have summarized the Final Rule, as well as the Recently Passed Legislation in this client alert.

DEDs: All services furnished in a dedicated emergency department, as defined in 42 CFR 489.24(b), regardless of whether such services are emergency services, are exempt from the prohibition under Section 603 (exempt from the definition of “applicable items and services”) and thus, paid under the OPPS.

On-campus PBDs: Items and services provided by on-campus PBDs are excepted from the prohibition under Section 603, subject to the limitations on relocation and expansion noted below.

PBDs "within the distance" of remote locations: HOPBDs located at or within the distance of 250 yards from a remote location of a hospital facility (which may be measured by surveyor reports to confirm such HOPBDs are within 250 yards (straight-line) from any point of a remote location) are excepted from application of Section 603 of the Bipartisan Budget Act of 2015.

Excepted HOPBDs – HOPBDs Billing under the OPPS Prior to November 2, 2015: HOPDS that were billing under the OPPS (in accordance with timely filing limits) with respect to covered HOPBD services furnished prior to November 2, 2015 are excepted from the new site-neutral payment provisions of Section 603 of the Bipartisan Budget Act of 2015. Providers have been curious how CMS will interpret the amendment for HOPBDs in existence prior to November 2, 2015 with respect to relocation or expansion of the facility, expansion of services, and change of ownership or other similar transactions. With respect to each of these concerns, CMS believes Congress intended Section 603 of the Bipartisan Budget Act of 2015 to except HOPBDs as they existed at the time that the Bipartisan Budget Act of 2015 was enacted and those items and services being furnished and billed by HOPBDs prior to November 2, 2015. CMS will handle relocations, expansions and changes in ownership of such HOPBDS as follows:

  1. Relocations/Expansion of Existing Departments. Excepted HOPBDs and the items and services that are furnished by such departments will lose the exception if the excepted HOPBD moves or relocates from the physical address listed on the provider’s hospital enrollment form as of November 1, 2015, except for the specific exceptions listed below. Furthermore, on-campus PBDs cannot relocate to off-campus and continue to be paid under the OPPS.

    Exceptions – Excepted HOPBDs may relocate temporarily or permanently, without loss of excepted status, for extraordinary circumstances outside of the hospital’s control, such as natural disasters, significant seismic building code requirements, or significant public health and public safety issues. Such relocation requests will be evaluated by the CMS Regional Offices. CMS plans to provide instructions through subregulatory guidance on the process to request a relocation exception.

  2. Expansion of Clinical Family of Services. While CMS proposed that an excepted HOPBD (an HOPBD that furnished items or services billed under the OPPS prior to November 2, 2015) would be able to seek payment under the OPPS only for the provision of items and services within its “clinical family of services” (those services such excepted HOPBD furnished prior to November 2, 2015), CMS reconsidered its position due to operational complexity and will permit excepted HOPBDs to receive payment under the OPPS for all billed items and services, regardless of whether such items and services were furnished prior to November 2, 2015. CMS intends to monitor this position and review how a limitation on volume or services or limitation on lines of services would work in practice.

  3. Change of Ownership and Similar Transactions. Excepted status of an HOPBD may be transferred only if ownership of the main provider is also transferred and the new owner accepts assignment of the Medicare provider agreement. If the provider agreement terminates, any excepted HOPBDs and the excepted items and services furnished by such would lose their excepted status.

  4. Payment of the Nonexcepted Items and Services. CMS adopted the Medicare Physician Fee Schedule (MPFS) as the applicable payment system for nonexcepted HOPBDs' items and services and issued, as part of the OPPS Final Rule, an Interim Final Rule with Comment Period to establish rates under the MPFS for nonexcepted items and services furnished by HOPBDs effective for services furnished on or after January 1, 2017.

Recently Passed Legislation

While the Final Rule rejected commenters' requests for exceptions related to “mid-build” HOPBDs, December 7, 2016, Congress passed the 21st Century Cures Act (H.R. 34 and S6719), which amends at Sections 16001 and 16002 of the 21st Century Cures Act, section 1833(t)(21) of the Social Security Act to address stakeholders' concerns related to “mid-build” HOPBDs and certain cancer treatment facilities. Specifically, HOPBDs that furnish items or services during 2018 or a subsequent year will be excepted from application of the Section 603 of the Bipartisan Budget Act limiting reimbursement to the MPFS, provided the following conditions are met:

  1. The Secretary of HHS receives an attestation from the provider prior to December 31, 2016 that such HOPBD met the requirements of 42 CFR 413.65;

  2. The provider includes the HOPBD as part of the provider on its enrollment form; and

  3. The HOPBD both (i) met the “mid-build requirement” and (ii) the Secretary of HHS receives an attestation from the CEO or COO of the provider attesting that such HOPBD met such requirement. A provider meets the “mid-build requirement” if the provider had a binding written agreement with an outside unrelated party for the actual construction of the HOPBD prior to November 2, 2015.

Additional Information

If you have questions regarding the CY 17 OPPS Final Rule, contact your Kutak Rock LLP attorney or one of the authors of this client alert.