United States: Is Provider-Based Reimbursement Going Away?

We get this question every year: will Medicare, Medicaid or other payors continue to recognize hospital-level facility fee reimbursement for hospital outpatient departments meeting the provider-based designation criteria at 42 C.F.R. 413.65? This year, there have been suggestive developments and a few data points to consider as you evaluate your operations:

New Codes to Report Off-Campus Provider-Based Departments Required for 2016 or sooner. In the Hospital Outpatient Prospective Payment System Final Rule, scheduled to be published in the Federal Register on November 10, 2014, CMS reports that it is requiring new codes on hospital and physician bills to note when services are rendered in an off-campus provider-based department ("PBD").

A new modifier ("PO") is designed to identify claims for hospital outpatient services in off-campus PBDs, though there is no reimbursement impact. The modifier will not be required for services furnished in a "remote location," "satellite facility," or "emergency department." Use of the modifier will be voluntary for 2015, but mandatory in 2016.

Furthermore, CMS will change the Place of Service ("POS") codes for professional services by deleting POS 22 (outpatient hospital) and adding two new POS codes: one to identify services furnished in a "remote location," "satellite facility," or "emergency department" and another to identify services furnished in an off-campus PBD. The new POS codes will be required as soon as CMS makes them available, which could be before the 2016 deadline for the hospitals' new modifier PO.

CMS states that there will be no reimbursement impact for reporting such codes.

Continued OIG Study of Provider-Based Billing in 2015 Work Plan. The OIG has had provider-based status on its annual Work Plan several times in the past few years. The OIG in its 2015 Work Plan (published on-line on October 31, 2014) continues to study provider-based billing and its economic impacts.

OIG will examine whether provider-based facilities meet the CMS regulatory criteria. The study is expected to be published in FY 15.

Additional studies will review and compare Medicare payments for physician office visits in provider-based vs. free-standing clinics. These findings are also expected in FY 2015.

A New York hospital settled a Medicare self-disclosure based on potential False Claims Act liability associated with provider-based failures for $3.3 Million on October 16, 2014.

Our Lady of Lourdes Memorial Hospital, a 242-bed hospital in Binghamton, NY voluntarily self-disclosed a provider-based violation resulting from hyperbaric oxygen therapy services rendered by a third-party in a facility that failed to meet provider-based requirements. Little additional details are available in the media or DOJ press release. The settlement related to five years of Medicare reimbursement.

These data points show that provider-based status compliance remains a focus of attention, and that compliance concerns for provider-based violations are rising. Providers are encouraged to audit their provider-based facilities. We have >suggested three types of self-audits that could be considered by providers, though there are clearly many ways for organizations to determine if they have risks around these regulations.

The short answer to the question, however, of whether provider-based status is going away is: No, not yet. The OIG has, since at least 1999 (prior to the publication of the Final Rule on provider-based status), recommended eliminating provider-based designation for hospital affiliated physician practices, but CMS, then HCFA, refused. Rather, the agency felt that encouraging integration of hospital and physician services was desirable, and that provider-based status facilitated that end. There have also been statutory changes proposed to reduce reimbursement at off-campus provider-based departments. So long as the Medicare program needs to be able to distinguish from a hospital-based facility and a free-standing facility, the provider-based criteria will likely remain. But if data collection efforts can explain that the cost structure of such facilities merits reimbursement reductions, providers could see payment changes in the future.

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