2017 OPPS final rule – Generally good news for providers regarding provider-based locations


CMS finalizes 2017 Hospital Outpatient Prospective Payment System rule

On November 1, 2016, the Centers for Medicare & Medicaid Services (CMS) finalized changes to the Hospital Outpatient Prospective Payment System (OPPS). CMS’ announcement with a link to the OPPS final rule is available here. The Bricker & Eckler Health Care group will author a series of publications summarizing the significant changes/issues in the OPPS final rule; each publication will be specific to an area of law impacted by the OPPS final rule. The first publication on finalized Meaningful Use rules is available here. The second publication on site-neutral payments for new off campus provider-based departments is available here. The third publication in the OPPS series, which expands on the topic covered in the second alert and provides a detailed review of the issues affecting provider-based departments in the Final Rule, is below. 

CY 2017 OPPS Final Rule brings generally good news to providers regarding provider-based locations

On November 1, 2016, the Centers for Medicare & Medicaid Services (CMS) issued the CY 2017 Hospital Outpatient Prospective Payment System final rule (the Final Rule), implementing Section 603 of the Bipartisan Budget Act of 2015 (Section 603), which excludes applicable items and services furnished at off-campus hospital outpatient provider-based departments (PBDs) that began billing on or after November 2, 2015, from reimbursement under the hospital outpatient prospective payment system (OPPS) as of January 1, 2017 (non-excepted off-campus PBDs). Off-campus PBDs that were furnishing covered OPPS services prior to November 2, 2015, are excepted from Section 603’s payment limitation (excepted off-campus PBDs).

Since the July 6, 2016, release of the CY 2017 Hospital Outpatient Prospective Payment System proposed rule (the Proposed Rule), hospitals have been anxiously awaiting the Final Rule to see if CMS would adopt the harsh results of the Proposed Rule. While CMS did finalize most of the Proposed Rule, the Final Rule brings the following good news:

  • CMS provided a method for non-excepted PBDs to bill on an institutional claim form for services furnished in 2017 and receive reimbursement at approximately half the OPPS rates received under OPPS. 
  • Excepted off-campus PBDs can expand the scope of services furnished at the excepted location and bill for all services under OPPS.
  • All services furnished at dedicated emergency rooms are excepted from Section 603’s payment limitation.  
  • Non-excepted off-campus PBDs can likely continue to qualify as “child sites” under the 340B Program. 
  • Off-campus PBDs are excepted if they furnished any covered OPPS services prior to November 2, 2015, and billed services under OPPS in accordance with timely filing limits.

Payment rates for non-excepted off-campus PBDs

The Final Rule establishes payments for both excepted and non-excepted off-campus PBDs.  Excepted off-campus PBDs can continue to bill under OPPS. Non-excepted PBDs will bill under the Medicare Physician Fee Schedule (MPFS) with a special modifier and with newly-determined rates for these services that are, in aggregate, 50 percent of the OPPS rates reimbursed at excepted locations. The Proposed Rule identified the MPFS as the “applicable payment system” for non-excepted off-campus PBDs but caused a great deal of uncertainty for the provider community because it did not specify exactly how billing for services at non-excepted locations would occur, raising the specter of a number of regulatory challenges. (These challenges are discussed in Bricker’s previous bulletin on the Proposed Rule.)

Under the Final Rule, beginning with services furnished on January 1, 2017, hospitals will continue to bill non-excepted services on an institutional claim form, and these charges will continue to appear on the hospital cost report. Likewise, physicians will bill for their professional services on a physician claim form at the facility rate (for services for which they are entitled to bill) under the MPFS. The hospital claim must include the “PN” modifier to denote the site of service as a non-excepted off-campus PBD and trigger the appropriate MPFS rate for the professional service.

In order to set the new MPFS rates specifically for non-excepted off-campus PBDs, CMS is issuing an interim final rule with comment period. These rates will apply solely to those services furnished in a non-excepted off-campus PBD, as no other existing payment rate category appropriately captures the relative resource costs of furnishing these services while allowing the hospital to continue to bill for services provided in these settings through the same process as for services provided in its excepted off-campus PBDs. These special MPFS CY 2017 rates will be on aggregate 50 percent less than the OPPS rates for the same services, though the specific rate for some services could be higher or lower than this. CMS anticipates CY 2018 rates to be set in the same manner as CY 2017 rates. Data from both years will then be used to set CY 2019 rates based on actual (rather than estimated) resource cost allocations for providing the various services in the non-excepted off-campus PBD setting.

Expansion of services at excepted off-campus PBDs

CMS declined to finalize its proposal to limit excepted off-campus PBDs from expanding into new types of services in the future. However, hospitals must ensure that the PBD does not also expand into a new location or it will lose its excepted status. Under the Final Rule, CMS will pay the full OPPS rates for all services furnished and billed by an excepted off-campus PBD.  

CMS had proposed that if an excepted off-campus PBD furnished services from a “clinical family” of services that it had not furnished and billed for prior to November 2, 2015, services in any new clinical family would not be excepted. Only services within a “clinical family” of services an excepted off-campus PBD had previously furnished and billed for prior to November 2, 2015, would be excepted and continue to receive OPPS reimbursement. The Proposed Rule would not have limited the volume of services an excepted location could bill under OPPS within any excepted clinical family, however.   

Although CMS did not finalize its proposal to limit reimbursement for services in new clinical families, CMS remains concerned about growth at excepted locations. In particular, CMS remains concerned that if excepted off-campus PBDs are permitted to expand the types of services provided and to receive OPPS rates for new services, hospitals could purchase physician practices and add the new physicians to existing excepted off-campus PBDs. This would result in newly purchased physician practices furnishing services that are paid at OPPS rates, which CMS believes Section 603 was intended to prevent. CMS believes Section 603 gives it the authority to limit the volume of services furnished at excepted off-campus PBDs to the level that an excepted location was furnishing prior to the date of the Budget Act’s enactment. CMS is interested in feedback from stakeholders about how it could do so and will be monitoring potential shifting of services to excepted off-campus PBDs, including on-campus PBDs, by monitoring services billed using the new “PO” modifier for “off-campus PBD” going forward.

Exceptions for certain outpatient PBDs

Emergency departments

Section 603 expressly excepted dedicated emergency departments [1] (ED) from the new prohibition on OPPS reimbursement for items and services furnished at off-campus PBDs that began billing under OPPS on or after November 2, 2015. In the Proposed Rule, CMS proposed that all services furnished in an ED, whether or not they are emergency services, be exempt from Section 603’s reimbursement limitation and continue to be paid under the OPPS. In the Final Rule, CMS adopted its proposal as final without modification. This means that all items and services (emergency and nonemergency) furnished in an ED are exempt from the payment limitations of Section 603 so long as the department maintains its status as an ED.

Remote locations

CMS finalized its proposal without modification to except off-campus PBDs that are within 250 yards of a remote location. In addition to emergency departments, Section 603 also excepts off-campus PBDs that are “within a distance” (which is defined as within 250 yards) from a remote location [2] of a multi-campus hospital. As a result, items and services furnished at off-campus PBDs that are within 250 yards of a remote location will be reimbursed under OPPS, even though remote locations are considered off-campus for purposes of the provider-based status rule. In response to requests that CMS clarify the acceptable methodology to measure the distance, CMS also clarified that hospitals may measure the 250 yards from any point of the physical facility that serves as the site of services of the remote location to any point in the PBD.

 340B Program implications

The Proposed Rule’s silence on the impact on 340B Program participation caused significant uncertainty about how or whether CMS intended to affect 340B Program participation by non-excepted off-campus PBDs. Fortunately, in the Final Rule CMS clarified that it did not intend to affect 340B Program participation in non-excepted off-campus PBDs. Under the Final Rule, services provided at these locations will continue to appear on the hospital’s cost report and CMS believes non-excepted off-campus PBDs can continue to qualify as “child sites” under the 340B Program. This is consistent with CMS’ statements that neither Section 603 nor the Final Rule were meant to eliminate the provider-based designation but rather to affect only the reimbursement rate for certain provider-based locations. However, CMS was also quick to say that the Health Resources and Services Administration (HRSA) has the final authority on qualification for and compliance with the 340B Program requirements.

Excepted status if off-campus PBDs furnished OPPS services before November 2, 2015

The Final Rule grants excepted status to off-campus PBDs that furnished any covered OPPS services prior to November 2, 2015, and billed under OPPS in accordance with timely filing limits. The Proposed Rule had excepted off-campus PBDs only if the PBD billed for services under OPPS before November 2, 2015. CMS maintained its view that an off-campus PBD must have been treating patients (i.e., furnishing services) before Section 603’s enactment but offered some flexibility by granting excepted status to off-campus PBDs that furnished covered OPPS services before November 2, 2015, but had not yet billed for those services until after that date, so long as the services were billed within the OPPS timely billing requirements.

Other Final Rule results

CMS finalized the following from the Proposed Rule despite significant concerns raised by stakeholders:

Relocation of excepted off-campus PBDs

CMS finalized its proposal to prevent excepted off-campus PBDs from relocating and remaining an excepted location. Excepted off-campus PBDs that move or change their physical address from the address listed on the PBD’s hospital Medicare enrollment form after November 2, 2015, will lose their excepted status and will not be reimbursed under OPPS. Instead, they will receive the site-neutral payments for non-excepted locations, discussed further above.  

CMS disagreed with stakeholders that suggested excepted off-campus PBDs should be permitted to relocate and continue to be reimbursed under OPPS. CMS is concerned that without a limitation on relocation, hospitals could relocate excepted off-campus PBDs to larger facilities or purchase additional physician practices and move them into the larger relocated facilities and continue to be paid under OPPS. Reiterating its view that Section 603 applies to off-campus PBDs as they existed at the time it was enacted, including the physical facility and the personnel and equipment used to deliver services at that facility, CMS rejected a more flexible relocation option under the Final Rule. Without some restriction on relocation, excepted off-campus PBDs could relocate to larger facilities, using different equipment and staff, and would no longer resemble the same off-campus PBD that existed when Section 603 was enacted. In CMS’ view, to allow excepted off-campus PBDs to relocate from the address in the hospital’s enrollment form as of November 2, 2015, such as by adding more space by adding a second suite in a multi-tenant building, and continue to be paid under OPPS rates would allow hospitals to continue the practices that CMS believes Section 603 was enacted to curtail. 

CMS will allow excepted off-campus PBDs to relocate and retain excepted status only in extraordinary circumstances out of the hospital’s control, such as natural disasters, seismic building code requirements, and public health and public safety that necessitate moving to a new location (either temporarily or permanently). By contrast, CMS will not allow them to relocate and retain excepted status if the relocation is due to business or other reasons, such as the location losing its lease or a building becoming outdated. CMS will be issuing subregulatory guidance on the extraordinary circumstances process. CMS intends the relocation exception to be limited and rare to ensure that excepted off-campus PBDs are not able to subvert the intent of Section 603, which CMS believes is to allow excepted status for off-campus PBDs only as they existed at the time of the Budget Act’s enactment. The CMS Regional Offices will be responsible to evaluate and approve or deny relocation requests on a case-by-case basis. CMS also clarified that an on-campus PBD as of November 2, 2015, that moves off-campus would not be excepted and would no longer be reimbursed under OPPS.

Change of ownership of excepted off-campus PBDs

In the Final Rule, CMS finalized without modification its proposals regarding change of ownership and the impact on off-campus PBDs. This means that:

  • Excepted status for an off-campus PBD may be transferred to a  new owner only if ownership of the main hospital is also transferred and the Medicare provider agreement is accepted by the new owner;
  • If the buyer of the main hospital and its associated off-campus PBD terminates the existing Medicare provider agreement rather than accepting it, the previously-excepted off-campus PBDs and all previously-excepted items and services furnished in the off-campus PBDs will no longer be excepted and will not receive OPPS rates; and
  • An individual excepted off-campus PBD cannot be transferred from one hospital to another hospital and maintain its excepted status.

In the Final Rule, CMS used the following example to explain the impact of Section 603 on hospital combinations. CMS explained that if a hospital owner decides to combine two certified hospitals under one Medicare provider agreement with one CMS Certification Number (CCN), the result would be loss of excepted status if the off-campus PBD was not enrolled as a provider-based department of the resulting combined hospital (i.e., the surviving hospital after the combination) and billing under the OPPS for covered items and services furnished prior to November 2, 2015. This means hospitals must take care when evaluating which hospital will be the surviving hospital in such restructuring efforts.

No exception for off-campus PBDs in process or in mid-build

CMS did not grandfather off-campus PBDs that were in process or under construction as of November 2, 2015, but which had not yet furnished any covered OPPS services as of that date.  Affected stakeholders had requested that CMS except these “Mid-Build” locations, but CMS believes it lacks the authority to do so because Section 603 does not except locations that had not yet furnished OPPS services before its enactment.

[1] A “dedicated emergency department” is defined in the existing Emergency Medical Treatment and Active Labor Act regulations.

[2] A remote location of a hospital is a facility or organization that is either created by, or acquired by, a hospital that is a main provider for the purpose of furnishing inpatient hospital services under the name, ownership, and financial and administrative control of the main provider. A remote location of a hospital comprises both the specific physical facility that serves as the site of service for which separate payment could be claimed under the Medicare or Medicaid program and the personnel and equipment needed to deliver the services at the hospital.  Under the provider-based status regulations, remote locations are considered off-campus from their main facility.  

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