Medicare Finalizes Rules Implementing Moratorium on Hospital Off-Campus Provider-Based Departments

On November 1, 2016, the Centers for Medicare & Medicaid Services (CMS) issued its long-awaited final 2017 Medicare Outpatient Prospective Payment System rules (OPPS), finalizing the regulations implementing the moratorium on new hospital off-campus provider-based departments (PBDs) under Section 603 of the Bipartisan Budget Act of 2015. Under Section 603, off-campus PBDs not billing Medicare under the OPPS by November 2, 2015 (Non-Excepted Sites) will cease being able to bill under the OPPS after December 31, 2016.  Only those off-campus PBDs billing under the OPPS prior to November 2, 2015 are exempt from the moratorium (Excepted Sites).  (Section 603 also excepted off-campus emergency departments.  On-campus PBDs are exempt from the moratorium.)

The moratorium left open several issues affecting Excepted and Non-Excepted Sites including the treatment of sites under development on November 2, 2015, reimbursement for services provided in off-campus emergency departments, the expansion and relocation of Excepted Sites, and Medicare reimbursement for services performed in Non-Excepted Sites.

The 2017 OPPS provided much needed guidance along with some good news on OPPS reimbursement for emergency department services and the expansion of Excepted Sites. Non-Excepted Sites Under Development.  Multiple commenters submitted comments to CMS on the proposed 2017 OPPS rules regarding off-campus PBDs that were in development as of November 2, 2015.  These commenters encouraged CMS to treat those sites as Excepted Sites given the significant investment made and the rather sudden and unexpected passage of Section 603. 

Unfortunately, CMS states in the 2017 OPPS that it lacks the statutory authority under Section 603 to create an exception for these off-campus PBD locations.  This leaves a health system with sites under development to develop the sites as ambulatory surgery centers or to bill for services furnished in the sites under the Medicare Physician Fee Schedule (Physician Fee Schedule).

Treatment of Emergency Departments

Per the final rules, all services furnished in emergency departments (so long as the emergency department continues to maintain that status under federal regulations) are exempt from the moratorium, regardless of whether the services are emergency services. Expansion of Excepted Sites.  CMS proposed previously that after November 2, 2015 Excepted Sites could not bill under the OPPS for services beyond that clinical family of services being billed provider-based as of November 2; in other words, Excepted Sites could not expand the services provided there.  CMS, in response to feedback from commenters on the burdens imposed by this definition of expansion, did not finalize the proposed limit on expansion of services lines (though it did not foreclose promulgating future limits on expansion).  This is good news for health systems as it provides flexibility in determining how to best utilize Existing Sites. Relocation of Excepted Sites.  However, CMS did finalize its proposed rules severely restricting the ability to relocate Excepted Sites.  An Excepted Site will lose that status and the ability to bill under the OPPS if it moves from the address and suite number listed on its Medicare provider enrollment form as of November 2, 2015.  This means that a health system could not relocate an Excepted Site to a larger, less expensive, more convenient, or more appropriate space without losing its excepted status.  CMS states that its Regional Offices will consider requests for exceptions on this relocation bar on a case-by-case basis (including in extraordinary circumstances such as a natural disaster). Reimbursement for Services in a Non-Excepted Site.  Medicare will reimburse health systems for services furnished in Non-Excepted Sites under the Physician Fee Schedule.  For most services, the rates for 2017 will be half of the applicable  OPPS rate for those services.  Medicare will reimburse health systems directly for those services, not the providing physician as previously proposed. Health systems developing off-campus emergency departments or considering reconfiguring the services offered in Excepted Sites can take some solace in the 2017 OPPS.  CMS’ decision to pay health systems directly under the Physician Fee Schedules (with claims being billed with a PN modifier) is also good news.  At the same time, though, off-campus PBDs will continue to be subject to significant scrutiny by CMS, and providers must be diligent to avoid an inadvertent site relocation and be mindful of continuing provider-based billing compliance issues such as inappropriate shared space arrangements. Finally, providers have the opportunity to submit comments through December 31 so there is still a window of time to provide additional comments to CMS.  

For additional information and discussion on this topic, please get in touch with your regular Calfee contact or the attorney listed below: Michael G. VanBuren 216-622-8343 mvanburen@calfee.com  

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