AMERICAN HEALTH LAWYERS ASSOCIATION Institute on Medicare and Medicaid Payment Issues Provider-Based Status, Under Arrangements, and Related Medicare Principles and Requirements March 20-22, 2013 Baltimore, MD By Thomas E. Dowdell* Catherine T. Dunlay* Fulbright & Jaworski L.L.P. Taft Stettinius & Hollister LLP Telephone: (202) 662-4503 Telephone: (614) 220-0236 Email: tdowdell@fulbright.com Email: cdunlay@taftlaw.com *This presentation is for informational purposes only and does not constitute legal advice. Overview Provider-based status, under arrangements, enrollment/chow, 340B drug discount program, practitioner supervision, anti-fraud and abuse, and other federal requirements that may apply to hospital outpatient services Outpatient provider-based services and outpatient under arrangements services Provider-based status principle and requirements Under arrangements principle and requirements Enrollment/Change of Ownership (CHOW) issues Medicare outpatient services supervision requirements Anti-Kickback Statute and Stark Law Recent developments 2 2 1
Types of Hospital Services Services furnished in a provider-based department (PBD) of the hospital to hospital patients Services furnished under arrangements to hospital patients in a PBD or outside the hospital 3 Compare Provider-Based Services to Hospital Under Arrangements Services Provider-based services are furnished in a PBD that complies with the applicable provider-based status requirements Provider-based regulatory requirements first effective in 2000 (previously included in a Medicare manual and thereafter in a Program Memorandum)* Requirements apply to a facility/location, not a specific service* Apply for Medicare and Medicaid payment purposes* 4 2 2
Compare Provider-Based Services to Hospital Under Arrangements Services Hospital under arrangements services furnished within or outside a hospital (but remember coverage requirements)* Under arrangements coverage permitted under the Medicare statute since 1966* Payment to the hospital for the service discharges the patient s liability Conditions apply to services, not a facility/location* Medicare only?* 5 Significance of Provider-Based Status Medicare Conditions of Participation (S&C-12-17- Hospitals (Feb. 17, 2012) CMS promulgated a new policy for practitioners ordering hospital outpatient services)* Payment amounts (limitations now apply to outpatient department therapy services)* Coverage* Commercial payers* 6 2 3
Significance of Provider-Based Status (cont.) Medicare billing (two bills/one bill) Hospital outpatient unbundling rule Physician incident to services 340B discount drugs program 7 What Is Provider-Based Status? General Rule Requirements apply if status as provider-based or freestanding affects Medicare payment amounts or beneficiary liability for services furnished therein On campus -within 250 yards of hospital s main buildings* Main buildings not defined Facility with inpatient acute care beds How measured?* Exterior wall of hospital main building Main door of main provider to main door of providerbased facility 8 2 4
Provider-Based Requirements Specifically (42 C.F.R. 413.65) On-campus and off-campus facilities Licensure Main provider and facility are operated under the same license (except if the State requires separate licensure or prohibits common licensure)* 9 Specific Requirements On-campus and off-campus facilities (cont.) Clinical Services Professional staff of the facility have clinical privileges at the main provider Differentiation in privileges?* Exclusive physician contracts?* Medical staff committees at the main provider are responsible for medical activities in the facility Medical records are integrated Inpatient and outpatient services are integrated 10 2 5
Specific Requirements On-campus and off-campus facilities (cont.) Financial integration financial operations of facility are fully integrated within financial system of main provider Public aware of hospital-facility relationship (system awareness insufficient) Signage is a critical factor Shared space arrangements (2011 negative determination)* Provider-based obligations, including EMTALA 11 Specific Requirements Additional requirements that apply only to offcampus facilities Operation under the ownership and control of the main provider Provider solely owns facility Common governing body Common organizational documents Main provider has final responsibility for administrative decisions 12 2 6
Specific Requirements Off-campus facilities (cont.) Administration and supervision Facility is under direct supervision of the main provider Same monitoring and oversight 13 Specific Requirements Off-campus facilities (cont.) Location 35-mile radius 75/75 patient population tests 75% of facility s patients reside in same zip code areas as 75% of main provider s patients 75% of facility s patients who require inpatient care received such care from main provider Rural children s hospital neonatal intensive care unit 14 2 7
Provider-Based Obligations EMTALA Physician services must be billed with correct place of service (POS) indicator (POS 22 outpatient/11 clinic)* Hospital outpatient departments must treat all Medicare patients for billing purposes as hospital outpatients (remember public awareness standard requires a department to be held out to the public and to other payers as part of the hospital)* Hospital outpatient department must comply with Medicare three-day payment window rule* Outpatient department must meet applicable hospital health and safety rules, including Life Safety Code 15 Hospital COP Physical Environment (42 C.F.R. 482.41) Standard hospital must meet the applicable provisions of the 2000 edition of the Life Safety Code of the National Fire Protection Association (NFPA) Exceptions CMS determines that State law adequately protects patients Waiver if LSC application would result in unreasonable hardship 16 2 8
Hospital COP Physical Environment 12/17/2010 Letter from Director, Survey and Certification Group, to State Survey Agency Directors (S&C-11-05-LSC) (as revised 2/18/2011) Amends SOM and certain appendices Non-contiguous facilities 17 Life Safety Code Mixed occupancy classifications* Hospital component facility must be adequately separated from the other building occupancies in order to be eligible for its own occupancy classification If not adequately separated, the most stringent occupancy classification applies to the entire building 18 2 9
Life Safety Code Three LSC classifications* Health Care Occupancy (most stringent) Patients who are mostly incapable of self-preservation during an emergency 24/7 Sleeping accommodations 19 Life Safety Code Ambulatory Health Care Occupancy Patients who are mostly incapable of self-preservation during an emergency Not 24/7 No sleeping accommodations Anesthesia services 20 2 10
Life Safety Code Business Occupancy (least stringent) Patients who are mostly capable of self-preservation during an emergency Not 24/7 No sleeping accommodations Does not provide anesthesia services 21 Management Contracts Principle Only applies to off-campus facilities subject to the provider-based requirements that are operated under a management contract Main provider (or an organization that also employs the staff of the main provider and that is not the management company) must employ the staff who are directly involved in the delivery of patient care* 22 2 11
Management Contracts Principle Exceptions Personnel solely furnishing administrative services Professionals who furnish patient care services of a type that would be paid under a fee schedule established under Part 414 (physicians, non-physician practitioners) 23 Under Arrangements Principle Provider-based status is not permitted for any facility or organization that provides all of its patient care services under arrangements* Intended to prevent hospital from using under arrangements coverage provisions to circumvent provider-based requirements Hospital may not contract out entire department and claim it as provider-based Unlike management contract principle, no distinction between on-campus and off-campus facilities or organizations* 24 2 12
Joint Ventures Principle Facility operated as a joint venture may be considered provider-based if certain conditions are met: Facility is partially owned by at least one provider Facility is located on the main campus of a provider who is a partial owner (does not have to be the majority owner) Facility is provider-based to the provider on whose campus the facility is located Facility satisfies all applicable provider-based requirements, including the financial integration requirement (shared income and expenses, facility costs reported in hospital cost center, and facility s status incorporated and readily identified in hospital s trial balance)* 25 Provider-Based Attestation Favorable provider-based determination by CMS is no longer expressly required* Benefits of seeking a determination Limit overpayment exposure forward (at least until the occurrence of a material change that results in non-compliance)* Appears to limit overpayment exposure backward to complete attestation submission date and not to all cost periods subject to reopening (transmittal/reg)* 26 2 13
Provider-Based Attestation Off-campus PBD primarily furnishing services regularly performed in a physician s office; regs include presumption that facility is freestanding unless CMS determines the facility has providerbased status )* Joint venture PBDs* Off-campus PBDs subject to a management contract* PBDs in which under arrangement services are furnished* 27 Hospital Services Furnished Under Arrangements Hospital contracts with a third party vendor to provide services to hospital patients Service is billed by the hospital as a hospital service but performed by the vendor Vendor is paid a fee by the hospital and agrees to look solely to the hospital for payment 28 2 14
Under Arrangements Principle, Coverage and Payment Conditions Hospitals expressly permitted since 1966 to furnish items and services to patients through arrangements with third parties under the Medicare statute, regulations and manual provisions (42 U.S.C. 1395x(w); 42 U.S.C. 1395x(b)(3); 42 C.F.R. 409.3; Medicare General Information, Eligibility and Entitlement Manual (Pub. 100-01), Chapter 5, 10.3)* Payment of the hospital must discharge liability of beneficiary or any other party to pay for the items and services Hospital cannot merely serve as a billing mechanism 29 Under Arrangements CMS has stated that a hospital furnishing under arrangements services only applies to a hospital obtaining specialized health care services that it does not itself offer and that are needed to supplement the range of services that the provider does offer its patients (67 Fed. Reg. 49981, 50091 (Aug. 1, 2002))* This purported limitation is not included in the Medicare statute, regulations or manuals* 30 2 15
Under Arrangements Effective for cost reporting periods on or after October 1, 2013, routine services furnished under arrangement outside of a hospital are not recognized for Medicare payment purposes* Room and board, dietary and nursing services Result? The only services performed under arrangement outside hospital for hospital patients that are recognized for Medicare payment purposes are diagnostic tests* 31 Under Arrangements Hospital exercises professional responsibility over arranged for services Accept patient for treatment in accordance with admission policies Maintain complete and timely clinical record on patient Maintain liaison with attending physician regarding patient s progress Hospital s utilization review and quality assurance programs apply to the service* 32 2 16
Medicare Enrollment/Certification Medicare Enrollment Application Form CMS-855A (new practice location) CMS acceptance does not indicate that agency has determined that the facility meets the provider-based status requirements SOM 2004 and 2024, and S&C-09-08 (Oct. 17, 2008) Remote location addition with acceptance of seller s provider agreement (seller s CCN is retired ) does not necessarily require a survey except if inpatient and/or surgical services are furnished If facilities accredited, accreditation can t be extended to acquirer who rejects provider agreement; new survey must be conducted and no billing privileges until survey performed and compliance determination made 33 Medicare Enrollment/Certification Accept assignment/reject assignment of seller hospital s Medicare provider agreement?* Mission Regional Hospital Medical Center v. Centers for Medicare and Medicaid Services, Dec. No. CR2458 (Nov. 2, 2011)* Hospital acquires assets of another hospital and intends to operate acquired hospital as a remote location Acquiring hospital expressly declined assignment of acquired hospital s provider agreement CMS refused to recognize remote location until it was successfully surveyed 34 2 17
Medicare Enrollment/Certification The Joint Commission Accreditation Match between Joint Commission accreditation and hospital CCN Multi-campus hospital (one CCN) must have one governing body, one unified medical staff and a common nursing staff CMS revised governing body CoP to allow a multiple-hospital system (more than one CCN) to have one governing body* CMS declined to allow a multi-hospital system to have a single medical staff* 35 Medicare Enrollment/Certification CMS adopted, delayed enforcement, and has proposed to remove a requirement that at least one medical staff member be included on the governing body CMS has proposed requiring the governing body to consult periodically with the individual responsible for the medical staff For a multi-hospital system, consultation with the chief of each hospital s medical staff would be required 36 2 18
340B Drug Discount Program Covered Entities (Disproportionate share hospitals, children s hospitals, critical access hospitals, and sole community hospitals) may receive drugs for outpatients at discount price Covered Entities PBD may also participate in 340B Drug Discount Program if they satisfy certain conditions. HRSA requires that Covered Entity must include PBD on its Medicare cost report before PBD is eligible to participate* CHOW acquired hospital s off-campus PBDs* 37 Hospital Services Supervision Requirements Outpatient therapeutic services incident to physician services* Aid physician in treatment of patient Must be performed in the hospital or in a PBD* 38 2 19
Hospital Services Supervision Requirements Outpatient diagnostic tests Examination or procedure to aid in assessment of a medical condition or identification of a disease May be performed in the hospital, in a PBD, or in a non-hospital facility under arrangements 39 Hospital Services Supervision Requirements Different supervision requirements for therapeutic services and some diagnostic tests Only services excluded from supervision requirements are outpatient services that have their own statutory benefit and are not paid under the OPPS but rather under the MPFS, for example, outpatient diabetes selfmanagement training services and lab tests 40 2 20
Therapeutic Services Incident to Practitioner Services Supervision Requirements Supervision may be performed by a physician or by a certain nonphysician practitioner (clinical psychologist, licensed clinical social worker, physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse midwife)* Services are furnished by or under arrangements by the hospital Services are an integral although incidental part of practitioner s services 41 Supervision Requirements Therapeutic Services Services are performed in the hospital or in PBD* Services are provided under the direct supervision (or other level of supervision as specified by CMS for the particular service) of a practitioner, subject to certain requirements 42 2 21
Therapeutic Services Direct Supervision Supervisory practitioner must be immediately available to furnish assistance and direction throughout the procedure* Temporal requirement, no specific physical boundary requirement* Supervisory practitioner cannot be so physically distant that he/she could not intervene right away 43 Therapeutic Services Direct Supervision Supervisory practitioner cannot be performing another procedure or service that he/she could not interrupt Supervisory practitioner must have within his/her State scope of practice and hospitalgranted privileges the knowledge, skills, ability, and privileges to perform the service* Supervisory practitioner must be clinically able to furnish the service himself/herself 44 2 22
Therapeutic Services Direct Supervision Supervisory responsibility is more than the capacity to respond to an emergency and includes the ability to take over the performance of the procedure or provide additional orders 45 Therapeutic Services Direct Supervision Hospital should have in place credentialing procedures, bylaws and other policies to ensure that outpatient services furnished to beneficiaries are provided only by qualified practitioners 46 2 23
Nonsurgical Extended Duration Therapeutic Services Can last a significant period of time Have a substantial monitoring component that is typically performed by auxiliary personnel Have a low risk of requiring practitioner s immediate availability after the initiation of the service Are not surgical in nature 47 Nonsurgical Extended Duration Therapeutic Services Direct supervision is required during the initiation of the service, which may be followed by general supervision at the discretion of the supervisory practitioner Initiation means the beginning portion of the service which ends when the patient is stable and the supervisory practitioner determines that the remainder of the service can be delivered safely under general supervision* 48 2 24
Outpatient Diagnostic Tests Supervision Requirements Outpatient diagnostic tests are furnished by or under arrangements by participating hospital May be performed in or outside hospital* Tests are ordinarily furnished by or under arrangements by a hospital for its outpatients for the purpose of diagnostic study Tests would be covered as inpatient hospital services if furnished to an inpatient 49 Outpatient Diagnostic Test Supervision Requirements Diagnostic tests furnished to hospital outpatients by an entity other than the hospital are subject to hospital unbundling rule Particular diagnostic test must be performed under the appropriate level of supervision (general, direct, personal) as included in the quarterly updated MPFS Relative Value File* Physician must perform supervision, even if NPP is authorized under State law to perform* 50 2 25
Outpatient Diagnostic Tests NPPs cannot provide required physician supervision when hospital staff perform tests* When NPPs personally perform a diagnostic test, they must meet only the physician supervision requirements required under the Medicare coverage rules for that type of NPP* For example, NP must simply work in collaboration with a physician; PA must practice under a physician s general supervision 51 Outpatient Diagnostic Tests Outpatient diagnostic tests that require a physician s direct supervision have the same immediately available, qualifications, and clinically appropriate/able conditions as outpatient therapeutic services* 52 2 26
Outpatient Therapeutic Services and Diagnostic Tests Compliance Tips Review PBDs by location (on-campus, offcampus) and by type of service (therapeutic, diagnostic) Review hospital operations Appropriately designated supervisory physicians (diagnostic) and physician/npps (therapeutic) Hospital bylaws Supervision agreements Immediate availability 53 Outpatient Therapeutic Services and Diagnostic Tests Compliance Tips How is supervisory practitioner contacted Verify compliance with supervision requirements for diagnostic tests (general, direct or personal) 54 2 27
Potential Consequences for Non- Compliance With Supervision Requirements Recoupment of overpayments* Violation of Medicare Conditions of Participation for Hospitals* Federal False Claims Act knowing retention of overpayments* 55 Stark Law Generally Implicated if a hospital or other entity providing DHS has a direct or indirect financial relationship with a physician (or immediate family member) Vendor of under arrangements services is a physician or physician group, is owned by a physician or physician group or has a compensation relationship with a physician Physician is participant or has compensation relationship with a provider-based joint venture Physician is owner or has compensation relationship with manager of provider-based facility 56 2 28
Stark Law Under Arrangements Under arrangements analysis 2009 IPPS Final Rule Person or entity that has performed services that are billed as DHS is a DHS entity Services billed as hospital inpatient or outpatient services considered DHS even if not otherwise DHS (e.g., cardiac catheterization); except lithotripsy Person or entity that has presented a claim to Medicare for the DHS also continues to be a DHS entity Effective October 1, 2009 57 Stark Law Under Arrangements If physician has ownership or investment interest in under arrangements service provider Must meet an ownership exception under Stark Law if physician refers for the services that are provided under arrangements Rural exception Publicly traded securities Physician may own if does not refer Relationship with hospital must still meet exception for direct or indirect compensation relationship 58 2 29
Stark Law Under Arrangements When does an entity perform services? CMS declined to define Example if physician group does medical work and could bill for services, it performs the service Example entity that merely leases or sells space or equipment, furnishes supplies that are not separately billable, or provides management, billing services or personnel does not perform the service Court challenge - Council for Urological Interests v. Sebelius 59 Stark Law Per-Unit or Percentage Payment Effective October 1, 2009 Per-unit rental charges not permitted in space or equipment lease if reflect services to patients referred by the lessor to the lessee Rental payments may not be based on percentage of revenue raised, earned, billed, collected, or otherwise attributable to services performed or business generated in leased space or with leased equipment Applies regardless of whether relationship is direct or indirect Parallel changes made to exceptions for space leases, equipment leases, fair market value compensation arrangements, and indirect compensation arrangements 60 2 30
Anti-Kickback Statute Implicated in financial relationships with parties that also have referral relationship - whether or not physician Inability to set aggregate compensation in advance often precludes use of personal services and equipment lease safe harbors Guidance to consider safe harbors, joint venture fraud alert, supplemental compliance guidance for hospitals, special advisory bulletin on contractual joint ventures, questions for consideration in submitting advisory opinion request, advisory opinions 61 Anti-Kickback Statute 2010 Sleep Lab Services Advisory Opinions OIG Advisory Opinions 10-14, 10-23 and 10-24 All addressed under arrangements relationship between hospital and sleep lab services company Company had no physician or hospital ownership Favorable opinions 10-14 per unit fee, no marketing services 10-24 fixed fee, full-time marketing services Unfavorable opinion 10-23 per unit fee, part-time marketing services 62 2 31
Anti-Kickback Statute Suspect characteristics in under arrangements transactions: Hospital pays above market rates to influence referrals. Entity is in a position to influence referrals if it provides marketing services, has independent patient base, or is owned by referral sources. Entity accepts below-market rates to secure referrals from hospital to entity, its owners or affiliates. Hospital owns an interest in the entity so that investment returns may reward referrals. This also raises specter of undue influence in awarding contract. 63 Anti-Kickback Statute Referral source for hospital owns an interest in the entity. Even if services at fair market value, referral source could condition other referrals to hospital on award of contract. Transaction includes furnishing items or services outside scope of under arrangements services, or furnishing items or services to patients who are not hospital patients. 64 2 32
Anti-Kickback Statute Safeguards Ordering and interpreting physicians have no financial relationship Hospital payment to entity not conditioned on its receipt of payment for tests Hospital assumes business risk and contributes substantially space, furnishings, medical director, administrative services Opinions conditioned on compliance with Medicare under arrangements coverage and payment requirements 65 Recent Developments New CMS policy for practitioners ordering hospital outpatient services Therapy caps extended to therapy services furnished in hospital outpatient departments* Clarification of application of three-day window to nondiagnostic services* 66 2 33
Recent Developments Mission Regional Hospital Medical Center CMS RO denied provider-based status attestation based in part on shared space* 340B drug discount program (off-campus PBDs; significant expansion of program; disagreement as to proper use of 340B revenues; Congressional inquiries; audits; industry study)* 67 Recent Developments TJC accreditation of multi-campus hospitals single governing body, unified medical staff and common nursing staff CMS revision of Medicare CoP for hospital governing bodies to enable system with multiple hospitals and separate CCNs to have a single governing body CMS proposed revision of Medicare CoP to require governing bodies to consult periodically with chief of medical staff 68 2 34
Recent Developments CMS clarifies in 2012 OPPS Rule that therapeutic services and supplies with own benefit category that are paid under OPPS are subject to same payment conditions as therapeutic incident to services* CMS publishes proposed rule governing overpayments (false claims 60 days postidentification) 69 Recent Developments HHS OIG Work Plan for FY 2013 OIG continued review of physician coding for professional services furnished in hospital outpatient departments New initiative to review hospital-owned physician practices billing as provider-based to determine impact and extent to which CMS billing requirements are met* New initiative to review impact of hospitals acquiring ASCs and converting them to outpatient departments 70 2 35
Recent Developments MedPAC March 2012 Report to Congress Payment for E&M codes should be equalized in physician office and hospital outpatient department settings Set OPPS rate to equal difference between nonfacility practice expense and facility practice expense in MPFS October and November 2012 and March 2013 Meetings Consideration of equalizing additional payments across physician and hospital settings Frequently performed in physician offices Similar unit of payment Infrequently provided in emergency department setting Minimal difference in patient severity across settings 71 Future Will advantages of provider-based status continue? (MedPAC; Grand Bargain; increasing negative publicity regarding facility fees)* Benefits of affirmative provider-based determinations* Temporary treatment as provider-based (reg/transmittal)* Presumption that off-campus facility that furnishes services of the type ordinarily furnished in a physician s office is freestanding* 72 2 36
Future Shared space arrangements Time share arrangements Definition of provider s main buildings for determining on-campus or off-campus Integrated medical staff Joint venture outpatient departments 340B drug discount program 73 2 37