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Expect more changes to come for provider-based clinics.

There has been much federal oversight activity regarding provider-based clinics of late. For those of you that have such clinics and/or are anticipating the development of such clinics, study the rules, regulations, and pronouncements of the Centers for Medicare & Medicaid Services (CMS) carefully. This includes information coming from the ROs, or Regional Offices.

Let’s go over a few key areas of activity:

Campus Definition: for many of you, this is not a problem. Your campus is well-defined and there is no difficulty meeting the definitional rule of sites being within 250 yards of the main buildings. For some of you, this is a difficult area, however, particularly if you want to have a provider-based clinic that is on contiguous hospital property, but more than 250 yards from the main buildings. Remember that everything depends upon whether the clinic is on or off campus.

For any new clinics, you will want them to be on-campus, and thus not subject to the Bipartisan Budget Act (BiBA) of 2015 payment reductions. Is it possible for a clinic to be on contiguous hospital property, more than 250 yards from the main buildings, yet construed as being off-campus, for Section 603 purposes? The answer to this question depends upon your RO. You will need to either have the RO approve your campus definition or make specific requests for a determination before you establish the new clinic.

Note that there is ambiguity in the definition itself, as found at 42 CFR §413.65. What is meant by “main buildings?” Some campuses are compact, with the main building easily identifiable. Other campuses are more spread out, and identification of the main buildings is less obvious. It is interesting that the whole issue of identifying a hospital’s campus has become an issue because of BiBA 2015 and Section 603 clinics. Added to this is that CMS is making a payment reduction for excepted off-campus clinics.

Payment Process for Non-Excepted, Off-Campus Clinics: these clinics are supposed to be paid at the freestanding rate. For a variety of reasons, CMS is unable to use RBRVS and the relative values.  Thus, there is a proxy or relativity adjustor that is used, a percentage of APC payment, to approximate the facility payment under the Resource-Based Relative Value Scale (RBRVS). This proxy has been set at 40 percent, although this appears to be an arbitrary number.

Thus, the payment process for non-excepted, off-campus clinics that are classified as Section 603 clinics is the site-of-service differential reduced professional payment (CSM-1500 claim), and then 40 percent of the Ambulatory Payment Classification (APC) payment, to substitute for the facility payment under RBRVS.

Reduction in Payment for G0463: probably the biggest change in this area is that CMS is reducing the payment for G0463 for excepted off-campus clinics. The goal is to have the payment be at 40 percent, but CMS is going to phase in this change so that for the first year, the payment is 70 percent. The calculation is that the normal 60 percent reduction is being cut in half for a year. Starting in 2020, payment will reduce to 40 percent (or whatever the proxy percentage is, as determined then). This is a major change in payment. This would apply to excepted, off-campus clinics, that is, those that are not Section 603.

Does CMS have the statutory ability to do this? This is a legal question, and there may yet be lawsuits filed challenging CMS’s authority. If this does go to the courts, then circumstances could become complicated if there is any delay in implementation.

Note that this reduction is not being done in a budget-neutral fashion. Where is the money going? Apparently, the money that is saved is going back to CMS, and it amounts to hundreds of millions of dollars per year. The main goal for hospitals with off-campus provider-based clinics is to adjust to a loss in revenues and determining just how much that is going to be, both for 2019 and 2020.

Note that unless CMS issues guidance to the contrary, the PO modifier is now being used as a payment modifier. Previously, this modifier was used in order to collect data for the analysis of costs for the operation of off-campus provider-based clinics. If this modifier appears on the UB-04, then payment for G0463 will be reduced. The PN modifier appears unchanged, and is used by non-exempt, off-campus, provider-based sites to drive an overall reduction in payment for all services.

Service Lines: the basic idea with service lines is that if a new service is started at an excepted, off-campus, provider-based clinic, the new service should be subject to the reduced payments made to Section 603 clinics. There are really two aspects that need consideration, one of which is recognized by CMS, but the other has not been addressed.

  1. CMS has discussed the increase in service lines in the last several Outpatient Prospective Payment System (OPPS) Federal Register entries. There may be some new service that is started at an excepted, off-campus, provider-based clinic. Of course, we need a definition of what constitutes “new,” and then some means of categorizing service lines. For instance, a clinic may have been providing services within one of the CMS categories before the implementation of BiBA 2015. At the time the law was passed, the given clinic was not offering the service. If the clinic starts to offer this service again, does that mean that payment will be reduced to that of a non-excepted, off-campus, provider-based clinic?
  2. An already established excepted, off-campus, provider-based clinic may increase the volume of services for an already established service line. For instance, say three physicians are added to a roster of four physicians at the clinic. Does this mean that the increased volume of service is subject to the payment reduction?

CMS has not recognized nor discussed this second issue. Addressing the first issue has been postponed for the last two years. This whole issue of specially reduced payment may be moot.  Since CMS is reducing the payment for G0463 for excepted, off-campus, provider-based clinics, there is little that would stop them from applying the reduction to all services at such clinics. If such a payment reduction occurs, then the increase in service lines or increase in volume would no longer be an issue.

The Future: it appears that CMS’s intent is to pay all off-campus provider-based clinics at a reduced rate for all services. If you are going to establish new provider-based clinics, do everything that you can to make them on-campus. If CMS does achieve this goal, then the service line and service volume issues will become moot.

This is a very complicated area.  Hospitals and hospital personnel involved with provider-based clinics will need to follow events and changes for the next several years.


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Duane C. Abbey, PhD, CFP

Duane C. Abbey, PhD, CFP, is an educator, author, and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University. Dr. Abbey is a member of the RACmonitor editorial board and is a frequent guest on Monitor Mondays.

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