CMS’s new proposed rules related to the Bipartisan Budget Act of 2015 would severely inhibit hospitals’ ability to expand and modify outpatient service offerings around the country. Issued on July 6, the regulations have yet to be finalized and comments are being requested; however, hospital planning executives are understandably fuming about the restrictive and complicated rules, which would compromise their ability to conduct provider-based billing at outpatient sites located more than 250 yards beyond the hospital walls. Of particular interest is the direct comment by CMS that Section 603 was designed to curb hospital acquisition of physician practices and the current practice of providing the same services under a higher-cost model of outpatient prospective payment system (OPPS).
How Did This Happen?
As outlined in a previous ECG blog post, Congress passed Section 603 of the Bipartisan Budget Act on November 2, 2015. The law effectively requires off-campus, provider-based departments established after the enactment date to bill under the Medicare physician fee schedule (MPFS) starting January 1, 2017. As hospital executives well know, this fee schedule provides much lower reimbursement relative to the OPPS for a variety of services, including office visits and procedures. Facilities currently in the construction phase were planned and developed with the assumption that the OPPS would be available for years to come. For many of these facilities, flipping from the OPPS to the MPFS will likely mean operating in the red instead of in the black.
Do Exceptions Exist?
The original law did establish exceptions to the required transition, but the language was somewhat vague, leaving CMS to more thoroughly define the exceptions. CMS has now opted to define those exceptions narrowly, which will probably make it difficult for most new facilities to qualify for OPPS. The table below outlines some of the exceptions in the law, as well as the impact of the proposed new rules.
| Exception | Implications of Proposed New Rule |
| On-Campus Location | Facilities located within 250 yards of a main hospital or “remote location” are exempted; the proposed rule contains little guidance with regard to how to measure the 250 yards. |
| Relocations/ Expansions | Many observers speculated that hospitals might circumvent the law by relocating and/or expanding existing OPPS sites; however, the proposed rule clarifies that grandfathered sites need to remain at their existing address and provide services within the same “clinical family.” The rule even goes so far as to define 19 separate clinical families. Any additional or new services provided in grandfathered locations will have to be evaluated for meeting these criteria or may be at risk for being paid under an alternative methodology. Relocations might be allowed for natural disasters or other extraordinary events. |
| Emergency Departments | The rule clarifies that outpatient EDs will be exempted from this transition and can continue to bill under OPPS. |
| Payment System | On an interim basis, CMS is proposing that the MPFS be the “applicable payment system” for the majority of the items and services furnished by nonexcepted off-campus provider-based departments. Operationalizing any payment mechanism other than OPPS is going to be a challenge for hospitals to implement by January 2017. |
Where to From Here?
Prior to the proposed rules being issued on July 6, hospital planning executives may have been holding out hope that the confusion surrounding the exceptions might have led to continued application of OPPS, and even expansion of it in the future. The proposed rules appear to dash those hopes. Although the hospital community will fight the rule, CMS may be unlikely to change its stance, given that a looser interpretation of the law might create even more uncertainty for hospitals. Allowing multiple exemptions would create a system under which hospitals would frequently explore opportunities to exploit loopholes that would enable them to continue to receive the advantages of the higher OPPS schedule. Years of legal wrangling would be sure to ensue.
Although the jury is not out yet on this rule, CMS is making a strong statement that it intends to significantly reduce utilization of outpatient services that could be provided at a similar cost to those in lower-cost settings in the future.
Published July 20, 2016