Bipartisan Budget Act Section 603: Long-term Solution or Immediate Problem?
Know the impact of this regulation on off-campus hospital departments.
Section 603 (Site Neutral Payments Provision) of the Bipartisan Budget Act of 2015 (BBA) reduces Medicare reimbursement for certain off-campus hospital departments by eliminating eligibility for payment under the Hospital Outpatient Prospective Payment System (OPPS). With few exceptions, off-campus provider-based departments that began furnishing services on or after Nov. 2, 2015, are no longer eligible to be paid under OPPS, and will be paid under the Medicare physician fee schedule (MPFS) or the Ambulatory Surgical Center (ASC) payment system, both of which pay lower rates.
Here’s what hospitals should know about the effects of this legislation.
Section 603 at a Glance
- The coverage exclusion applies to off-campus hospital departments that did not bill for services under the Hospital Outpatient Prospective Payment System prior to Nov. 2, 2015.
- The coverage exclusion does not apply to on-campus outpatient departments; “grandfathered” departments; inpatient remote locations; separately certified, hospital-based entities; or devoted emergency departments.
- Section 603 provides no protections for facilities that were undergoing construction, acquisition, or conversion as off-campus outpatient departments as of Nov. 2, 2015.
- It is unclear whether the Centers for Medicare & Medicaid Services (CMS) will allow providers to relocate provider-based sites.
- The new site-neutral payment rules adversely affect rural populations by reducing the number of local facilities for outpatient services.
Defining a Hospital Outpatient Department
The requirements for a determination that a facility or an organization has provider-based status is codified in the Code of Federal Regulations, Part 42, Section 413.65(a)(2).
CMS’ OPPS specifically defines a hospital outpatient department as “part of a hospital where you get outpatient services, like an emergency department, observation unit, surgery center, or pain clinic;” and outpatient hospital services are “medical or surgical care you get from a hospital when your doctor hasn’t written an order to admit you to the hospital as an inpatient.” Some services, such as surgery, lab tests, or X-rays, may be considered outpatient even if the patient spends the night at the hospital.
The descriptions of on-campus and off-campus locations in the BBA differ from the definitions used in the existing provider-based regulations. The BBA’s definition of on-campus includes:
Facilities meeting the definition of on-campus under the current provider-based regulations (i.e., the physical area immediately adjacent to the provider’s main buildings and other areas and structures that are not strictly contiguous to the main buildings, but are located within 250 yards of the main buildings); and
Facilities within 250 yards of a “remote location of a hospital.”
A remote location of a hospital is a facility “furnishing inpatient hospital services under the name, ownership, and financial and administrative control of the main provider, in accordance with the provisions of this section.”
What the Rule Covers
The BBA policy has been in effect since Jan. 1, 2017. The rule will affect all off-campus hospital outpatient departments, with the following exceptions:
- On-campus outpatient departments – On-campus outpatient departments (old or new) will continue to be allowed to bill under the OPPS.
- “Grandfathered” departments – Off-campus hospital departments billing under the OPPS prior to Nov. 2, 2015, are not subject to Section 603.
- Separately certified, hospital-based entities – Home health agencies, hospices, critical access hospitals, rural health clinics, and federally qualified health clinics (FQHCs), except for certain look-alike FQHCs, are exempt.
- Inpatient remote locations of a hospital
- Dedicated emergency departments
Hospitals surprised by the implementation of the BBA need to re-evaluate their plans for facilities they earmarked as future hospital outpatient departments.
Existing Excepted Departments
Effective Jan. 1, 2017, the general rule is that excepted provider-based departments (PBDs) and the items and services they furnish will lose their exception status if they move or relocate from the address listed on the provider’s hospital enrollment form as of Nov. 1, 2015. Note the unit or suite number is considered part of the address. To retain excepted status, a PBD may not purchase or expand into other units within the building.
Note: CMS created an exception for off-campus PBDs that relocate (temporarily or permanently) due to extraordinary circumstances outside a hospital’s control, such as natural disasters, significant seismic building code requirements, or significant public health and public safety issues, that necessitate moving to a new building. The applicable CMS regional office will review exceptions to the relocation policy, which CMS expects to be rare and unusual.
CMS also did not address expanding an excepted PBD address (e.g., adding onto a building, acquiring more space within the building and removing walls to enlarge an existing excepted address, etc.). It remains unclear whether CMS will provide guidance regarding such situations.
CMS acknowledged that Section 603 does not recognize mid-build or under development PBDs as excepted off-campus PBDs. CMS did agree to an exception for off-campus PBDs that furnished a covered outpatient department service prior to Nov. 2, 2015, but had not submitted a bill to Medicare for that service prior to Nov. 2, 2015. PBDs in these situations are permitted to bill for these excepted services under OPPS.
CMS did not establish an automated method for identifying the addresses of excepted locations or tracking changes to those addresses. CMS notes it will instruct Medicare contractors to update their systems to identify all off-campus PBDs by address and the date the location was added to the hospital’s enrollment record.
Expansion of Services
Excepted PBDs adding new services (according to groups of “clinical families of services” defined by ambulatory payment classification) are no longer able to bill those new services under OPPS.
There is no limitation on expanding services at excepted PBDs for 2017 (see “Medicare Payment Changes for ‘New’ Off-Campus, Provider-Based Sites – CMS Publishes Final Rule and Congress Provides Some Relief”). You can expect that CMS will monitor the volume of services at excepted locations to determine whether this rule should be amended in the future for service expansions. Because Medicare services are reimbursed through a complex system of pricing, this section rationalizes the system by providing for new provider-based outpatient services (the same payment received for the same services delivered in hospitals). This lays the mortar for an excellent collaboration opportunity and has potential for additional benefits. One such benefit could be more reliance on entrepreneurial physicians who specialize in outpatient services. Their competitive edge encourages them to compete directly with dominant hospitals, which could cause a slow down on the surge of private medical practice takeovers.
Change of Ownership
Regarding change of ownership of an excepted off-campus PBD, CMS will allow an off-campus PBD to maintain its excepted status only if the new owners accept the existing Medicare provider agreement from the prior owner. An excepted PBD and the excepted items and services it provides will lose excepted status if the provider agreement terminates (see “CMS Finalizes Site-Neutral Payment Regulations for Off-Campus Provider-Based Departments of Hospitals”). Individual excepted off-campus PBDs transferred from one hospital to another will lose their excepted status. The excepted status does not transfer when a hospital merges into another.
Suggested Action Points
While we await further clarifications in the proposed and final rules for 2018, we strongly encourage hospitals that are in any stages involving any of the above information to contact CMS regional office. You will be able to determine what impact this newly passed law will have on your provider-based status. Otherwise, your hospital could be at risk of permanently losing its clinics’ existing provider-based status.
OPPS: A History Lesson
The Hospital Outpatient Physician Payment System (OPPS) was originally created in response to the Balanced Budget Act of 1997 and Balanced Budget Refinement Act of 1999. Similar to the Inpatient Prospective Payment System, the main focus of the OPPS is to provide CMS with a tracking mechanism to predict and manage program costs by assigning fixed payment amounts to groups of services. The OPPS allows separate payments to be made to providers who practice in a hospital outpatient department. These payments are for offsetting the costs hospitals incur in complying with additional rules that do not apply to physician offices. Medicare cost-sharing obligations are often based on the total amount allowed by Medicare; Medicare beneficiaries typically must pay more for services they receive in hospital outpatient departments than they pay if they received the same services in an independent physician’s office.
The current OPPS classifies all hospital outpatient services into Ambulatory Payment Classifications (APCs). HCPCS Level II and CPT® codes are assigned to APCs by their similarities in clinical presentation or utilization of similar resources. One APC can represent numerous HCPCS Level II/CPT® code clusters, whereas another APC may only represent one clinical service.
81 Fed. Reg. 19,752, 79,699-729, 79,879-80 (Nov. 14, 2016)
CMS Finalizes Hospital Outpatient Prospective Payment Changes for 2017: www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-11-01-3.html
American Bar Association – Health Law Section, Health eSource, Vol. 13 No. 6, “Medicare Payment Changes for ‘New’ Off-Campus, Provider-Based Sites – CMS Publishes Final Rule and Congress Provides Some Relief,” February 2017: www.americanbar.org/publications/aba_health_esource/2016-2017/february2017/cmsfinalrule.html
CMS Finalizes Site-Neutral Payment Regulations for Off-Campus Provider-Based Departments of Hospitals: www.kutakrock.com/CMS-CY-17-Final-Rule-Site-Neutral-Regulations/
Bill Wong, CPC, CPMA, CDEO, CHC, CHPC, CCS, is a senior coding and compliance educator/auditor at Providence Health & Services in Seattle, Wash. He is a member of the Seattle First Hill, Wash., local chapter.
Michelle Ann Richards, BSHA, CPC, CPCO, CPMA, CPPM-I, is the director of engagement, Compliance Services Healthicity and owner of Coding & Compliance Experts. She is a member of the Elyria, Ohio, local chapter.
Donald E. Darling, Jr., JD, CHC, is a healthcare and Medicare fraud investigator at United Healthcare in Minnetonka, Minn., and the managing attorney of the Darling Law Office in Bloomington, Minn.
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