Proposed Rule On Hospital Outpatient Prospective Payment System May Create Challenges for Hospitals and Physicians

July 21, 2016 | Health Services

The Centers for Medicare & Medicaid Services (“CMS”) recently released a proposed rule that would implement Section 603 of the Bipartisan Budget Act of 2015 (the “Act”) and could significantly limit payments made under the Hospital Outpatient Prospective Payment System (“OPPS”), effective January 1, 2017.

Specifically, the proposed rule would greatly affect Medicare payment for certain outpatient items and services furnished by off-campus provider based departments (“PBDs”).  Section 603 of the Act states that items and services furnished by off-campus PBDs should not be considered covered outpatient department services for purposes of OPPS payment and should instead be paid “under the applicable payment system” under Medicare Part B if the requirements for such payment are otherwise met. CMS has determined that the Medicare Physician Fee Schedule (“MPFS”) would be the applicable payment system for the majority of non-excepted items and services provided in an off-campus PBD.

Thus, under the proposed rule, rather than paying hospitals directly, CMS would pay the physicians providing such services at off-campus PBDs based on the non-facility rate set forth in the MPFS. The following items and services, however, would be considered “excepted” and eligible for continued payment under OPPS:

  1. Emergency Departments.
    Items and services provided in a dedicated emergency department, regardless if it is an emergency or non-emergency service, are excepted from the proposed payment reform.
  2.  On-Campus PBDs.
    Items and services provided in a PBD located on campus, or within 250 yards of a remote location of the hospital are also excepted.  CMS advises hospitals to use surveyor reports or other appropriate documentation to verify whether their PBDs are within the 250 yard (straight line) delineation.
  3. Off-Campus PBDs Operating Prior to November 2, 2015.

The proposed rule also contains a grandfather clause whereby payments can be made directly to a hospital for items and services provided by an off-campus PBD that has been operating prior to November 2, 2015, unless the PBD expanded, relocated or changed ownership.

For instance, if a grandfathered PBD expands its services beyond the “clinical family of services” that it provided prior to November 2, 2015, it will no longer be eligible for exception and OPPS payment.

Similarly, a grandfathered PBD must continue to provide services at the same physical address as it did prior to November 2, 2015 to maintain eligibility for OPPS payment. CMS explains that “[i]n the case of addresses with multiple units, such as a multi-office building, the unit number is considered to be part of the address; in other words, an excepted hospital PBD could not purchase and expand into other units in its building, and remain excepted.”  CMS has requested public comments on whether it should develop a clearly defined, limited relocation exception process and whether it should consider exceptions for any other relocation circumstances that are completely beyond the control of the hospital and, if so, what those specific circumstances should be.

Finally, in the event of change of ownership, if the new owner assumes the existing Medicare provider agreement, a grandfathered PBD may maintain its excepted status. If, however, the new owner enters into a new Medicare provider agreement the exception would no longer apply.

CMS estimates that implementation of the proposed rule will reduce net OPPS payments by $500 million and increase payments to physicians under the MPFS by $170 million. Before a final rule is implemented, CMS is accepting comments on the proposed rule until September 6, 2016.

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