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As you may be aware, the Bipartisan Budget Act of 2015 was enacted on Nov. 2, 2015, to be effective on Jan. 1, 2017. There was no real warning that this regulatory change would be impacting the hospital industry aside from the longstanding concerns of MedPAC, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG), and other industry stakeholders. 

The anticipated increase in Medicare costs due to providers’ strategy of acquiring freestanding physician practices and converting them to hospital-based entities has gotten the attention of the Centers for Medicare & Medicaid Services (CMS) as well.

The implementation of Section 603 of the Act has been assigned to CMS, and a proposed regulation should be released in the 2017 fiscal-year Outpatient Prospective Payment System (OPPS) proposed rule to be released in late June or early July. CMS is interested in receiving questions, feedback, and specific anticipated scenarios while it is drafting the proposed rule. A mailbox has been created for hospitals and other interested parties for this purpose: www.Provider-BasedDepartments@cms.hhs.gov. It is anticipated that the final rule will be issued in late October or early November.

There have been several implementation questions and concerns raised by the hospital industry over the past few months. These questions cover the enrollment process, cost reports, coding, and modifiers, as well as billing forms. Be sure to address your specific issues in your comments to CMS. The application of exceptions and or grandfathering provisions for off-campus, provider-based departments should be addressed in the proposed rule.  

Sites “under development” may receive a regulatory fix that could enable hospitals that were in various stages of development on Nov. 2, 2015 to continue to operate under the payment expectations relied upon when they made significant financial commitments or investments. CMS may consider whether architectural plans were completed and if bids for construction were finalized. The securing of financing commitments, purchases of land and building supplies, and expenditure of construction funds may impact the decisions as well. Finally, the receipt of zoning approvals, certificate of need finalization, and appropriate state agency approvals completed also may be important in securing a positive grandfathering decision.

The projected effect of Section 603 on existing off-campus, hospital provider-based departments (HPBDs) that are relocating or renovating has been causing concern for many hospitals. Merely moving from one space to another with no change in the Medicare provider number or billing protocols should not impact your existing status. It is my opinion that Congress did not intend to preclude hospitals from changing or expanding this type of grandfathered entity. Quality usually improves with these types of service expansions and relocations. Remember, provider-based status is site-specific, not service-specific. Therefore, the addition of new services should not change the grandfathered status. I remind you once again to submit your scenario for CMS so hopefully it can be addressed in the proposed rule.

Changes of ownership of HPBDs and the grandfathering status for a new owner are additional open issues that need to be addressed in the proposed rule. If the HPBD continues to provide services at the same address with the same billing history, but under a new provider number (or if the existing number is simply assumed by the buyer), then what will be the outcome regarding its status? CMS will need to be specific regarding these scenarios.

Section 603 does not apply to “dedicated emergency departments” (DEDs).  There is a one-third test definition of a DED that recognizes that DEDs provide both emergent and non-emergent services. The definition requires that at least one-third of all outpatient visits for the treatment of emergency medical conditions be on an urgent basis. Remember that DEDs must be marketed to the public through the name, posted signs, or advertising that care provided on an urgent basis does not require a previously scheduled appointment. DEDs also provide radiology, laboratory testing, and medication administration, as well as diagnostic and therapeutic services.

Finally, the Congressional Budget Office estimates that the federal government will save $9.3 billion over the next 10 years with the implementation of Section 603. Try not to be one of the casualties, and remember that by submitting your scenario, you can improve your chances of continuing to be a grandfathered, off-campus HPBD.

As I have done in previous articles, I will finish with a Provider Reimbursement Review Board (PRRB) tip. A provider or group of providers may bypass the PRRB hearing process and obtain expedited judicial review (EJR) of a final determination of reimbursement that involves a challenge to the validity of a statute, regulation, or CMS ruling. PRRB jurisdiction must be established prior to granting an EJR request. 

There could be provisions in Section 603, addressed in the implementation by CMS, in the OPPS proposed rule that allow for qualification for an EJR. The higher courts would not be subject to HHS ability to overturn their decision. HHS can do this with a PRRB decision. 

A discussion with your legal advisors may be an excellent approach, after the final rule is issued, to consider your alternatives should you find yourself in the appeal process.


About the Author:

Stanley J Sokolove, CPA, is a former CFO technical compliance monitor for CMS. In that role, Mr. Sokolove provided oversight of the banking, finance and internal controls for CMS relating to NHIC, Corp., the DME MAC for Jurisdiction A. Prior to this position, Mr. Sokolove was an Administrative Law Judge, serving as a member of the Provider Reimbursement Review Board in Baltimore, Md. Mr. Sokolove is a member of the RACmonitor editorial board and makes appearances on Monitor Mondays.


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