Budget Bill Blues: The reimbursement equalization of hospital off-campus provider-based locations and independent health care facilities

On October 30, 2015, the United States Senate passed the Bipartisan Budget Act of 2015, H.R. 1314. If enacted as currently drafted, Section 603 of the Budget Act will significantly change how the Centers for Medicare & Medicaid Services (CMS) reimburses new off-campus outpatient departments (OPDs). Currently, hospital off-campus outpatient departments are reimbursed under Medicare’s outpatient hospital prospective payment system (OPPS). Under the Budget Act, hospital off-campus outpatient departments that first bill for covered OPD items and services after the enactment of the Budget Act (new off-campus OPD) will no longer be eligible for reimbursement under OPPS, except for hospital emergency departments.

Overview

For any new off-campus OPD, CMS would pay OPPS rates only through December 31, 2016. Beginning January 1, 2017, CMS would pay new off-campus OPDs using other Medicare payment systems such as the Medicare Physician Fee Schedule (MPFS) rates or the Ambulatory Surgery Center Payment System (ASC) rates.  

Under an exception in the Budget Act, CMS will continue to pay pre-existing off-campus OPDs using OPPS if the hospital billed the off-campus OPD prior to the date the Budget Act is enacted. The Budget Act also excludes items or services furnished by a dedicated emergency room, thereby carving out off-campus hospital emergency departments which would still be paid using OPPS.

The Budget Act also exempts on-campus OPDs from this reimbursement change and, interestingly enough, defines off-campus OPDs to exclude any department of the provider which is located on-campus to a remote location of a hospital. In the Budget Act, the exclusion of an OPD that is on-campus to a remote location (rather than on-campus to the main hospital provider) from the off-campus definition differs from the current provider-based regulation. Under the current provider-based regulation, an OPD that is on-campus to a remote location of a hospital would be an off-campus OPD. But for the purposes of this reimbursement change, the on-campus ODP of a remote location will be paid under OPPS and will not be affected by the reimbursement change.

Locations Affected

• New off-campus OPDs (i.e., hospital off-campus OPDs that have not billed for covered hospital OPD services prior to the date the Budget Act is enacted)

Locations and Services Not Affected

• On-campus OPDs
• Emergency departments
• Pre-existing off-campus OPDs (i.e., hospital off-campus OPDs that have billed for covered hospital OPD services before the date the Budget Act is enacted)
• OPDs that are on-campus to a remote location of a hospital (even though under the provider-based rule this location is considered an off-campus location)
• Other types of off-campus locations defined in other regulations (e.g., remote locations of a hospital, satellite facilities, and provider-based entities like rural health clinics)

Previous efforts to reduce reimbursement to hospital outpatient departments, such as efforts to eliminate reimbursement differences between hospital outpatient and physician office services, were aimed at reducing evaluation and management codes. By contrast, the Budget Act would reduce reimbursement for all items or services, including both evaluation and management, and surgical codes, except for those furnished in grandfathered or excluded facilities.

Information Reporting

The Budget Act also exempts on-campus OPDs from this reimbursement change and, interestingly enough, defines off-campus OPDs to exclude any department of the provider which is located on-campus to a remote location of a hospital. In the Budget Act, the exclusion of an OPD that is on-campus to a remote location (rather than on-campus to the main hospital provider) from the off-campus definition differs from the current provider-based regulation. Under the current provider-based regulation, an OPD that is on-campus to a remote location of a hospital would be an off-campus OPD. But for the purposes of this reimbursement change, the on-campus ODP of a remote location will be paid under OPPS and will not be affected by the reimbursement changes.

Unanswered Questions

There are bound to be questions that are not answered by the plain language of the Budget Act. The Budget Act provides an exception for OPDs that have billed Medicare prior to the date the Budget Act is enacted. Will there be an exception for hospitals that have started but not yet completed large building projects designed to include off-campus OPDs? No such exception exists in the language of the Budget Act. What about a pre-existing OPD that a hospital decides to relocate across town in 2016? Come January 1, 2017, will that OPD now be a new off-campus OPD subject to the reimbursement change? It appears that the pre-existing OPD could lose the exception once it is moved. We will be watching CMS’s interpretation of this section and provide updates if any of these questions are clarified. Stay tuned as this important issue continues to develop.

This Health Care Alert was written by Karen Smith and Claire Turcotte. Contact any member of the Health Care group for more information.