United States: OIG Issues Report On Provider-Based Facilities, Urges CMS To Make Changes


On June 16, 2016, the US Department of Health and Human Services Office of Inspector General (OIG) posted a report examining the Centers for Medicare & Medicaid Services' oversight of billing by provider-based facilities. The OIG concluded that CMS is unable to adequately monitor provider-based facilities and ensure appropriate payments. The OIG also reaffirmed its 1999 recommendation to eliminate the provider-based designation.


On June 16, 2016, the US Department of Health and Human Services Office of Inspector General (OIG) posted a report examining the Centers for Medicare & Medicaid Services' (CMS's) oversight of billing by provider-based facilities. The OIG concluded that although CMS is taking steps to improve its oversight of provider-based facilities, CMS is unable to adequately monitor provider-based facilities and ensure appropriate billing and payment.

The OIG continues to recommend elimination of the provider-based designation or implementation of equal payment for physician services, regardless of the setting where the services are provided. Alternatively, the OIG recommends that CMS (1) implement systems to monitor all provider-based facility billing, (2) make provider-based attestations mandatory, (3) ensure that CMS regional offices and Medicare Administrative Contractors (MACs) appropriately apply provider-based requirements when reviewing attestations, and (4) take appropriate action against hospitals and their off-campus provider-based facilities that do not meet the provider-based requirements.


Facilities owned by and integrated with a hospital are permitted to bill Medicare as a hospital outpatient department (i.e., a provider-based facility), which results in Medicare making separate payments for a facility fee and professional fee associated with each service furnished at the provider-based facility. This generally results in the total Medicare payment for services furnished at a provider-based facility being higher than the total Medicare payment for the same services furnished in a freestanding (i.e., non-provider-based) facility, where Medicare makes only a single payment for the service.

To qualify as provider-based, a facility—which may be on-campus (within 250 yards of the main provider) or off-campus (greater than 250 yards from the main provider)—must meet certain requirements, outlined at 42 CFR § 413.65. Hospitals may voluntarily submit a provider-based attestation (PBA) to CMS documenting that a facility meets the requirements to bill as a provider-based facility. Approval of a PBA by CMS provides certain protection to the hospital in the event that CMS later determines that the facility did not meet the requirements to bill as a provider-based facility.

In 1999, the OIG recommended eliminating the provider-based designation because oversight challenges and increased costs to Medicare and its beneficiaries were not balanced out by any documented benefit of having the provider-based designation. The Medicare Payment Advisory Commission (MedPAC) has also recommended equal payments for certain services provided in hospital outpatient departments and physician offices, rather than increased reimbursement for services at provider-based facilities. Consistent with these recommendations, the Bipartisan Budget Act of 2015 mandates that effective January 1, 2017, Medicare payments for most items and services furnished at new (as of November 2, 2015) off-campus provider-based facilities will be made under the applicable non-hospital payment system.

The OIG Report

The OIG surveyed 333 hospitals regarding their ownership of provider-based facilities; assessed documentation of 50 hospitals that reported owning off-campus provider-based facilities but had not submitted the voluntary PBA to determine whether the facilities met the provider-based requirements; assessed the extent to which CMS has methods to oversee provider-based billing; and analyzed challenges with CMS's review process of PBAs.

The OIG found the following:

  • Half of the 333 hospitals surveyed owned at least one provider-based facility.
  • More than 75 percent of the 50 hospitals that had not submitted a PBA owned off-campus facilities that did not meet at least one of the provider-based requirements.
  • CMS cannot determine the amount of overpayments for on-campus provider-based facilities or multiple off-campus facilities owned by the same hospital in one building or campus if the physician claim does not specify the exact location of the service.
  • CMS has difficulty obtaining the hospital documentation necessary to review PBAs.

OIG Recommendations and CMS Response

The OIG reaffirmed its recommendation to eliminate the provider-based designation or implement MedPAC's recommendation to equalize payment for the same physician services provided in different settings. If CMS does not eliminate or equalize provider-based payments, however, the OIG provided four recommendations.

Monitoring of Provider-Based Facilities' Billing

First, the OIG recommended that CMS implement systems to monitor all provider-based facilities' billing. CMS partially concurred with the recommendation, stating that the primary concerns are for off-campus provider-based facilities, rather than on-campus provider-based facilities, so CMS does not view it as efficient to allocate resources distinguishing among services that are provided in on-campus provider-based facilities and those provided on the main campus of the hospital.

Mandatory Provider-Based Attestations

Second, the OIG recommended that CMS make PBAs mandatory for all provider-based facilities. Although CMS said it shares the OIG's concerns that there are vulnerabilities in provider-based billing, CMS disagreed with this recommendation and instead has taken steps to remedy the problem, including implementing a new modifier and place-of-service codes for claims furnished in off-campus provider-based facilities. Further, CMS stated that the "amendments made by section 603 of the Bipartisan Budget Act of 2015 also require certain off-campus provider-based entities to be paid under applicable payment systems other than the OPPS rate . . . which may limit the vulnerability identified by the OIG in provider-based billing." CMS noted, however, that it will consider whether "additional activities" are needed to further address issues with overpayments to off-campus facilities.

Better Review of Provider-Based Attestations

Third, the OIG recommended—and CMS concurred—that CMS regional offices and MACs appropriately apply provider-based requirements when reviewing PBAs.

Overpayment Recovery

Fourth, the OIG recommended that CMS take appropriate action against hospitals and their off-campus provider-based facilities that do not meet the provider-based requirements. CMS concurred and stated that it will work with the MACs to recover overpayments.


The OIG's report is consistent with historic OIG and MedPAC concerns about provider-based facilities. Coupled with the amendments made by § 603 of the Bipartisan Budget Act of 2015 and CMS's response to this OIG report, all provider-based locations, both on- and off-campus, will likely continue to face increasing scrutiny. Hospitals should ensure that any facilities currently being treated as provider-based meet all requirements for provider-based status, and should evaluate whether to submit PBAs for provider-based facilities.

OIG Issues Report On Provider-Based Facilities, Urges CMS To Make Changes

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