What Happened to Hospital Off-Campus Outpatient Departments and How is it Going to Impact Our Business? An ACC Health Law Committee Quick Hit August 2, 2017 Lawrence W. Vernaglia & Jennifer Walsh Foley & Lardner LLP
Today s presenters Lawrence W. Vernaglia Chair, Health Care Industry Team Foley & Lardner LLP lvernaglia@foley.com Jennifer F. Walsh Public Affairs Director Foley & Lardner LLP jwalsh@foley.com 2
Agenda Continued Questioning: June 2016 OIG Report The Screeching Halt: BiBA Section 603 We re Here from the Government and we Ain t Gonna Help You: CMS Implementation As the Dust Settles: Understanding the impact on: Providers, Medical Device, Pharma Health IT 3
Recent publications A lot happened this summer! OIG Report CMS is Taking Steps to Improve Oversight of Provider-Based Facilities But Vulnerabilities Remain OEI-04-12-00380 CMS issued OPPS 2017 Proposed Rule, July 6, 2014; RIN: 0938-AS82 (to be published in Federal Register July 14, 2016), implementation of Section 603 of the Bipartisan Budget Act of 2015 ( BiBa 603 ) Comments on the proposal (CMS-1656-P) are due September 6, 2016 4
OIG Report on Provider-Based Dated June 2016 Half of all hospitals own at least one PB facility OIG believes vulnerabilities exist in compliance with PB regs Wants CMS to improve its oversight of PB facilities CMS not in full agreement with OIG report CMS hasn t provided OIG with any evidence that PB facilities produce specific benefits, such as integrated or improved quality of care that justifies the higher costs CMS cannot identify # of hospitals billing as provider-based Limits CMS ability to enforce BBA of 2015 CMS cannot create a population of off-campus PB facilities that should be grandfathered from new legislation 5
OIG Report on Provider-Based OIG flagged some of the most subjective standards in evaluating compliance but no specific reasons or examples of violations These facilities may be billing Medicare improperly and may be receiving overpayments Recommends CMS take appropriate action against hospitals (separate memorandum) 6
OIG Report on Provider-Based CMS concurs with recommendation to implement systems/methods to monitor billing PB facilities CMS believes not prudent to spend resources on distinguishing PB services on-campus vs off-campus CMS not in agreement with OIG requiring attestations on all PB facilities CMS concurs w/oig on ensuring regional offices/macs apply PB requirements appropriately when reviewing attestations CMS has not yet developed list of specific docs to be submitted with attestations 7
Implementation of Section 603, Bipartisan Budget Act of 2015 Core Change in the Law: services furnished at certain off-campus outpatient departments not paid at hospital rates Effective for items/services furnished after 1/1/2017 Applicable off-campus PBD are those not billing as hospital outpatient department prior to 11/2/2015 To be paid under applicable payment system under Medicare Part B 8
Dedicated Emergency Departments Excluded from Site Neutrality Must meet at least one of the following: 1. State licensure as an emergency room or emergency department; or 2. Holding out to the public as a place that provides care for emergency medical conditions on an urgent basis without requiring a appointment; or 3. At least 1/3 of all of outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment. CMS made clear that all services in the DED are exempt from site-neutrality, not just emergency services. 9
Off-Campus Departments Excepted from 603 - Relocation What happens if you relocate your excepted department? Very strict interpretation by CMS PBD is no longer excepted from Section 603 if PBD moves or relocates from physical address on provider s enrollment form as of 11/1/2015 For addresses with multiple units, unit # is part of address CMS soliciting input on situations where PBD must move due to extraordinary circumstances, i.e., natural disaster 10
Off-Campus Departments Excepted from 603 - Relocation Result: A grandfathered PBD must remain at its present location. Or become a DED or move on campus 11
Off-Campus Departments Excepted from 603 Change of services Off-campus PBD departments excepted for only those items and services PBD was billing prior to 11/2/15 Prevents excepted department from expanding services provided at location and getting paid under OPPS CMS believes this prevents hospitals from purchasing additional physician practices and adding those physicians to existing excepted off-campus PBDs Items and services defined as clinical families of services If excepted off-campus PBD provides services from a clinical family of services not furnished prior to 11/2/15, then those services not paid under OPPS CMS not limiting volume of excepted items and services within clinical family of services (at this time) 12
Off-Campus Departments Excepted from 603 Change of services Result: A grandfathered PBD may have some services billed under OPPS, with a split bill, and some services billed under an alternate payment model, like the MPFS 13
Change of Ownership and Excepted Status If provider is sold or merges in its entirety, a PBD s PB grandfathered status generally transfers to new ownership as long as no material change of PB status New owners must accept prior hospital s provider agreement If excepted off-campus PBD is transferred to new ownership, excepted department continues only if ownership of main provider also transferred If only excepted off-campus department is sold, then exception to Section 603 protection is terminated Prevents hospitals from selling specific departments 14
Payment for Services in Off-Campus PBDs CMS exploring options to allow off-campus PBDs to bill for services under another system, such as MPFS, and paid at applicable rate beginning in CY 2018 One year solution until systems can adapt May need to establish new provider/supplier type for nonexcepted off-campus PBDs So, in the meantime for CY 2017! CMS proposing physician or practitioner bill for nonexcepted services under MPFS and be paid at nonfacility rate (aka freestanding) Nonexcepted off-campus PBDs are still provider-based for cost reporting treatment No separate facility payment under OPPS 15
CY 2017 Proposed Payment Policy Options for nonexcepted services in off-campus PBDs Physician/nonphysician practitioner furnishing services bill under MPFS Or, off-campus PBD enroll as freestanding facility or supplier in order to bill nonexcepted items and services under MPFS Different from billing only for reassigned physician services CMS recognizes proposal to pay under MPFS could result in hospitals establishing business arrangements with physicians/nonphysician practitioners Beneficiary cost sharing equal to beneficiary cost sharing if service provided in freestanding facility Some services in off-campus departments not paid under OPPS Such as lab services, w/continue to be billed as is done currently 16
CY 2017 Proposed Payment Policy Hospitals and MDs may need to settle-up, because MD is billing/collecting Note CMS s Comments in the MPFS 2016 CMS soliciting comments on the impact of: Reassignment Rules Anti-Markup Rule Anti-Kickback Statute Stark Law 17
Off-Campus PBDs and Provider-Based Status Nonexcepted off-campus PBDs would continue to be considered as part of the hospital and deemed provider-based Thus, continue to report as provider-based in the Medicare cost report Appears to be CMS s message that 340B Drug Pricing can remain 18
Comments due September 6 All of this is CMS proposal Potential legislative responses Get comments in on time! 19
Congressional Activity U.S. House of Representatives recently passed legislation that would: Exclude cancer hospitals in off-campus outpatient departments from the new payment methodology; and Extend the date by which mid-build outpatient departments had to attest to a binding written agreement with an outside party for construction It is unclear whether the U.S. Senate will take up the measure or propose alternate legislation There is growing support within Congress to modify the law but not all agree on the best approach Congress is scheduled to recess later this week until September, making it challenging to act on this issue before the November elections 20
Impact? Providers: Radically-changed landscape for new off-campus outpatient departments: Financed off commercial/medicaid (for now) More DEDs New development will cling to main campus 21
Impact? Medical Device Manufacturers: Markets will be reduced for technology involved with outpatient procedures Replacement/Servicing of existing equipment should be OK No new services off-campus (except DED/Remote Locations) become aware of the clinical families If you have a signed contract, see how the legislation moves Think about how your device operates in a freestanding (non-opps environment) 22
Impact? Pharma Manufacturers: Similar to Medical Device Outpatient take-home drugs likely unaffected this likely does not address Part D 340B likely not impacted 23
Impact? Health IT: EMRs will continue to be needed at the freestanding facilities Probably also true for clinical software designed to prevent readmission, coordinate care, etc. But expect new sites to open much more slowly than in the past 24
Questions & Discussion Lawrence W. Vernaglia Chair, Health Care Industry Team Foley & Lardner LLP lvernaglia@foley.com Jennifer F. Walsh Public Affairs Director Foley & Lardner LLP jwalsh@foley.com 25
Acknowledgments Mr. Vernaglia and Ms. Walsh would like to thank their friend and colleague Cheryl Storey, CPA, Partner, Moss Adams LLP for her contributions to a prior version of this presentation. All errors or omissions, however, are those of Mr. Vernaglia and Ms. Walsh alone. 26