CMS Issues Final Rule Implementing Section 603 of the Bipartisan Budget Act of 2015

On November 1, 2016, CMS issued the long-awaited Final Rule implementing Section 603 of the Bipartisan Budget Act of 2015 relating to payment for certain items and services furnished by off-campus provider-based departments of hospitals (“PBD”). Generally, Section 603 provides that applicable items and services furnished by certain off-campus PBDs on or after January 1, 2017, will not be considered covered hospital outpatient department services for purposes of payment under the Outpatient Prospective Payment System (“OPPS”) and will be paid under the applicable payment system under Medicare Part B. In response to thousands of comments and recommendations by concerned stakeholders, CMS made certain changes to its Proposed Rule implementing Section 603 that was issued in July, 2016. The following bullet points summarize the key provisions of the Final Rule:

  • Despite numerous requests, implementation of Section 603 has not been delayed. CMS is finalizing implementation of Section 603, consistent with the provisions of the Final Rule, effective January 1, 2017. The CMS Office of the Actuary estimates the savings to the Medicare Part B program as a result of implementing Section 603 to be $50 million for CY 2017.
  • CMS issued an interim final rule with comment period to establish new site-of-service specific payment rates for the hospital technical component under the Medicare Physician Fee Schedule (“MPFS”) to be used by hospitals for billing for non-excepted items and services furnished by off-campus PBDs effective for services furnished on or after January 1, 2017.
  • With certain exceptions (e.g., therapy and preventive services and separately payable Part B drugs), CMS will use a transitional rate for CY 2017 that is 50% of the OPPS rate for each non-excepted item or service as the interim technical component of the MPFS for items or services provided at a non-excepted PBD. While recognizing that the equivalent MPFS non-facility rate may be higher or lower than the 50% reduction to the OPPS payment rates on a code-specific basis, CMS indicated that these new payment rates are intended to reflect the estimated relative resource costs of furnishing services under the MPFS using the packaging rules unique to the hospital outpatient setting.
  • This transitional rate (50% of the OPPS rate) will be used until such time as CMS has more precise data to better identify and value non-excepted items and services furnished by non-excepted off-campus PBDs and billed by hospitals.
  • Existing MPFS rates will be used for items and services that are currently paid the MPFS rate under the OPPS, including the majority of therapy and preventive services and separately payable Part B drugs. Similarly, lab services that are separately paid under the CLFS under standard OPPS policy will continue to be separately paid under the CLFS. Lab services that are packaged under standard OPPS policy will continue to be packaged under the newly established MPFS rate for non-excepted items and services. Non-excepted off-campus PBDs that provide partial hospitalization programs will be paid at the CMHC per diem rate for APC 5853. Non-excepted off-campus PBDs that provide partial hospitalization services may alternatively enroll as a CMHC, assuming they meet all applicable requirements.
  • Beginning January 1, 2017, non-excepted off-campus PBDs must report the newly established “PN” modifier on each UB-04 claim line on their institutional claim to identify non-excepted items and services, but should otherwise continue to bill as they currently do.
  • All items and services (emergency and non-emergency) furnished in a dedicated emergency department (“DED”) located on or off-campus are excepted from the provisions of Section 603 and may continue to receive OPPS payment, as long as the DED maintains its status as a DED under applicable regulations.
  • On-campus PBDs and items and services provided by such departments are excepted from the Section 603 provisions and may continue to receive OPPS payment.
  • Despite requests to make the definition more flexible (e.g., using a “reasonable proximity” test), CMS did not change its definition of “on-campus.” In order to be considered on-campus, the PBD must be within 250 yards of the main hospital’s buildings. The CMS Regional Office has case-specific discretion for making on-campus determinations, but CMS stated that there have been very few instances where there has not been consensus as to whether a facility was on-campus or off-campus.
  • A hospital may measure the 250 yard requirement to be considered within the allowable distance of a remote location of a hospital from any point of the physical facility that serves as the site of services of the remote location to any point in the PBD.
  • Excepted off-campus PBDs and the items and services that are furnished by such departments would no longer be excepted if the excepted off-campus PBD moves or relocates from the physical address that was listed on the provider’s hospital enrollment form as of November 1, 2015. Similarly, on-campus PBDs that relocate off-campus would not be excepted from the Section 603 provisions.
  • Exceptions to CMS’s relocation policy will be evaluated on a case-by-case basis by the applicable CMS Regional Office in the limited instances of extraordinary circumstances outside of the 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 (either temporarily or permanently).
  • After consideration of public comments, CMS decided not to implement its proposed policy to limit service line expansion provided at an excepted off-campus PBD. Accordingly, an excepted off-campus PBD will receive payments under the OPPS for all billed items and services, regardless of whether it furnished such items and services prior to November 2, 2015, as long as the excepted off-campus PBD remains excepted.
  • While not implementing a limit on the volume of services furnished at an excepted PBD to the level furnished prior to November 2, 2015, CMS stated that it has authority to do so and that it intends to monitor for potential shifting of services to excepted off-campus PBDs and on-campus PBDs, and, if appropriate, will propose to adopt a limitation on the expansion of services or service lines in future rulemaking.
  • Despite concerns raised by commenters, “mid-build” or “under development” off-campus PBDs are not included among the types of excepted off-campus PBDs. (Legislative efforts are continuing to extend grandfathering to these off-campus PBDs.)
  • CMS will permit excepted status of an off-campus PBD to be transferred to a new owner if ownership of the main provider is also transferred and the Medicare provider agreement is accepted by the new owner.
  • With respect to excepted off-campus PBDs, hospitals are required to maintain documentation sufficient to prove that the PBD was billing for covered hospital outpatient department services furnished prior to November 2, 2015 (not just Medicare billing data).
  • The supervision rules that apply for hospitals will continue to apply for non-excepted off-campus PBDs because the status of these sites as hospital departments did not change, just the mechanism by which they will be paid.
  • CMS indicated that services provided at non-excepted off-campus PBDs will continue to be reported on the hospital’s cost report which, under HRSA’s current methodology, should enable them to continue to be eligible for the 340B drug program.
  • CMS anticipates that the beneficiary cost-sharing for non-excepted items and services would generally be equal to the beneficiary cost-sharing if the service was provided at a freestanding facility.

CMS will provide additional instruction to implement Section 603 through sub-regulatory guidance. In addition, CMS will issue instructions to Medicare contractors as appropriate, including instructions to update their systems using enrollment data that would identify each off-campus PBD by physical address and by the date it was added to the hospital’s enrollment.

The Final Rule will be published in the Federal Register on November 14, 2016. A display copy is available of the Final Rule and Fact Sheet.

For More Information

Please contact Harriet Franklin at 610-205-6014 or Kirsten M. Raleigh at 610-205-6015 should you have any questions or concerns regarding the Final Rule.

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.