On November 2, 2015, President Obama signed The Bipartisan Budget Act of 2015, a two-year, $80 billion budget deal that raises the national debt limit. Under section 603 of the Act, Medicare payments for most items and services furnished at an off-campus department of a hospital that were not being billed as a hospital service prior to the date of enactment (i.e., November 2, 2015) will, going forward, be paid under the applicable non-hospital payment system ─ either the Physician Fee Schedule or the Ambulatory Surgery Center Payment System.
This is a significant reimbursement change for those contemplating an arrangement as an off-campus department of a hospital (HOPDs), which results in significantly lesser reimbursement for services rendered in these settings upon the effective date of the legislation, January 1, 2017.
The only grandfathering provision contained in the Act is for HOPDs that were in existence as of November 2, 2015, and billing their services as hospital services as of such date. Despite MEDPAC’s recommendation earlier this year that existing HOPDs not be grandfathered, these HOPDs will continue receiving reimbursement under the Medicare Hospital Outpatient Prospective Payment System (HOPPS).
The Act incorporates the Centers for Medicare & Medicaid Services’ (CMS) provider-based (PBD) definition of HOPDs as those locations that are not on the main campus of a hospital and are located more than 250 yards from the main buildings. This “site neutrality” provision addresses certain policymakers’ concerns in recent years that Medicare should not be paying different amounts for the same medical services based solely on the location or type of provider. The Act also addresses concerns that hospitals may be improperly incentivized to acquire and label certain outpatient providers (such as physician practices or ambulatory surgery centers) as HOPDs in order to take advantage of higher payment rates for services furnished in a hospital outpatient setting.
Definition of “hospital campus” and on “campus”
The Act’s definition of a hospital campus does have one significant difference from CMS’s position in the PBD regulation which requires that a multi-campus hospital must designate one main campus from which all outpatient departments of the hospital are measured, even those located on a remote campus location. Under the Act’s definition, a multi-campus hospital could continue to acquire or construct on-campus outpatient departments of a hospital within 250 yards of any of the hospital’s campuses (including remote campuses) and continue to be paid the Medicare HOPPS rates.
Under the Act, the definition of what constitutes on “campus” has not changed from what is contained in the PBD regulation at 42 CFR § 413.65. The definition does not apply to other off-campus organizations that are required to satisfy the provider-based regulation, such as remote locations of a hospital (i.e., inpatient campuses of a multi-campus hospital), satellite facilities, and provider-based entities, such as rural health clinics, nor does it apply to on campus HOPDs. Payments to these organizations, even those established or acquired on or after the date of enactment of the Act or after January 1, 2017, will not be impacted.
Those Most Impacted
The big winners seem to be hospitals with existing off-campus HOPDs since they are grandfathered in under the higher existing reimbursement model. They have the government to thank for giving them what many will call an unfair competitive advantage, but also for new uncertainties surrounding their future growth and expansion.
Hospitals with off-campus HOPDs that were under development at the time the law was enacted are most negatively impacted by this decision, because the grandfathering provision does not extend to those not yet billing as off-campus HOPDs on November 2, 2015, even though significant costs for these projects were already incurred. The Act does appear to maintain, through the incorporation of the definition of “campus” from the PBD regulation, the ability of a provider to request a waiver of the strict 250 yard requirement, by incorporating that definitional language including “and any other areas determined on an individual case basis, by the CMS regional office, to be part of the provider’s campus.” Accordingly, those who are in this unfortunate position of already investing significant sums to establish an off-campus HOPD that was not yet up and running and billing for its services as hospital services on November 2, 2015, may be able to obtain relief through an individual waiver request to CMS.
Kristen Larremore is a partner in the health law practice at Waller.