Provider-Based Status, Under Arrangements, and Related Medicare Requirements AHLA Medicare & Medicaid Law Institute Baltimore, MD March 26, 2015 Andrew Ruskin Lawrence Vernaglia Morgan Lewis & Bockius Foley & Lardner LLP (202) 739-5960 (617) 342-4079 aruskin@morganlewis.com lvernaglia@foley.com 1 An attestation must be filed before becoming provider-based A whole hospital can be provider-based to another hospital Joint ventures can still be provider-based Joint ventures can use their own billing number Physicians at the provider-based site must have privileges at the hospital Patients of the provider-based site must be referred to the hospital for inpatient services, wherever the hospital has the resources to treat the patient Commercial patients can be treated as freestanding patients for provider-based sites Congress and CMS LOVE provider-based sites 2 Page 1
Advantages of provider-based status Requirements Special cases of joint ventures, management agreements, and under arrangements relationships Resolving the tension between providerbased status and patient satisfaction Resolving the tension between providerbased status and physician satisfaction Provider-based space layout issues The future of provider-based reimbursement 3 Medicare/Medicaid payment amounts Medicare coverage 340B drug discount program eligibility Main provider/remote location DSH, IME, and bad debt payments Inclusion in main provider s third party payer contracts Counting residents for direct GME and IME payments 4 Page 2
5 CMS wants to pay for services under OPPS only when the hospital maintains the proper level of control over the quality of care and finances of the provider-based site. 6 Page 3
Licensure Clinical Integration Financial Integration Public Awareness 7 Ownership and control Administrative Integration 8 Page 4
Need to be on the same license unless contrary to State law 9 Common medical staff privileges Proper monitoring and oversight Reporting relationship of medical director Central control of QA and UR Medical records are integrated in a unified retrieval system (or cross reference) of the main provider. Integration of inpatient and outpatient services 1 0 Page 5
Need shared income and expenses Hospital department costs are reported in a cost center of provider Provider-based facility costs are reported in appropriate cost center(s) of main provider Financial status of facility is incorporated and readily identified in main provider s trial balance 1 1 Must be held out to the public and other payers as part of the main hospital When patients enter the provider-based facility or organization, they are aware that they are entering the main provider and are billed accordingly. 1 2 Page 6
100% ownership of the business enterprise Same governing body Same organizational documents Final administrative responsibility for administrative decisions, contracts, personnel actions, personnel policies, and medical staff appointments 1 3 Proper monitoring and oversight The provider-based site obtains the following services from the hospital: billing; records; human resources; payroll; employee benefit package; salary structure; and purchasing 1 4 Page 7
EMTALA Physician Billing. Physician services must be billed to Medicare with the correct site of service code Provider Agreement. Provider-based sites must comply with the terms of the provider agreement 1 5 Non-discrimination. Physicians are obligated to comply with non-discrimination provisions applicable to hospital settings Equal Billing Treatment. All Medicare patients must be billed a facility charge DRG Payment Window. Hospital Health and Safety Code Compliance. 1 6 Page 8
Beneficiary Notices. For off-campus provider-based sites. Statement of the amount of the patient s potential financial liability. Prior to the delivery of services. If the exact type and extent of care are not known prior to the delivery of care, then explain that the patient will incur a coinsurance obligation that would not be incurred if the provider-based site were freestanding, include an estimate based on typical or average charges for visits to the provider-based site, and furnish a statement that the patient s actual liability will depend upon the actual services furnished by the provider-based site. If the beneficiary is unconscious, under great duress, or for any other reason unable to read a written notice and understand and act on his or her own rights, the notice must be provided, before the delivery of services, to the beneficiary s authorized representative. 1 7 35 Mile Rule. Off-campus sites may qualify as provider-based if they are within 35 miles of the hospital. 75 Percent Tests. Determine whether servicing the same patient population. 1 8 Page 9
DSH Hospital Test. Ownership by a DSH hospital with an adjustment greater than 11.75 percent or is a Pickle hospital and is: Owned or operated by a unit of State or local government; A public or non-profit corporation that is formally granted governmental powers by a unit of State or local government; or A private hospital under contract with a State or local government. 1 9 Additional rules for children s hospitals and rural health clinics. Must be in same State or, in some cases, adjacent States. 2 0 Page 10
Prior approval of provider-based status is not required Attestation process Voluntary Eliminates risk of retrospective recoveries Available only when there is a differential in payment 2 1 Material changes Permits ( may report ) notification to CMS to avoid retrospective reopenings Disclosures 2 2 Page 11
2 3 250-yard rule On-campus joint ventures: Must be partially owned by hospital; Location on the main campus; Provider-based to the hospital on whose campus the site is located; and Must meet all the requirements applicable to all provider-based sites. 2 4 Page 12
No definition of operated as a joint venture. Perhaps can furnish all of the equipment, personnel, and administrative and management services to the facility. Should be done pursuant to a written agreement. Should seek CMS Regional Office acknowledgement of propriety of relationship. 2 5 Only on-campus joint ventures expressly allowed. Need to overcome various regulatory hurdles: Financial integration. 100% ownership of business enterprise. Prohibition on furnishing patient care services entirely under arrangements. 2 6 Page 13
Stark Rule DHS entity definition Prohibits referring physicians from entering into joint ventures with hospitals to furnish DHS in provider-based space. Now, provider-based JV rules basically limited to facility/facility JVs. 2 7 A facility that is operated under a management contract must meet the following conditions: Administrative functions of the facility are integrated with those of the main provider Main provider has significant control over facility operations Management contract is held by main provider itself 2 8 Page 14
Main provider (or an organization that also employs staff of main provider and that is not management company) employs staff directly involved in delivery of patient care Exceptions Personnel who solely furnish administrative services; and professionals who furnish patient care services of a type paid under Medicare physician fee schedule (physicians, NPPs) May not use Leased employees for direct patient care: What is a Leased employee? personnel who are actually employed by the management company but provide service for the provider under a staff leasing or similar arrangement 2 9 What is under arrangements? Services furnished under arrangements are services for which receipt of payment by the hospital... with respect to services [covered under Medicare] discharges the liability of [the patient] or any other person to pay for the services. 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 (August 1, 2002). 3 0 Page 15
What is under arrangements? (cont.) Under arrangements is not intended to allow a hospital to merely serve as a billing mechanism for the other party. To qualify as proper under arrangements billing, must exercise professional responsibility over the service. This includes: Applying same quality controls as are applied to other services; Accepting patients in accordance with hospital s admission policies; Maintaining clinical record of diagnoses, medical history, physician orders, progress notes, and services furnished; and Ensuring the medical necessity of the services. 3 1 Can t furnish all patient care services under arrangements Could have vendor offer equipment or personnel or physical space? Also could have vendor offer component of services? 3 2 Page 16
3 3 Concern with creating disincentives for patients with private insurance to receive services in provider-based space, due to coinsurance. CMS has stated that it can t dictate to private insurers how they pay for services. 3 4 Page 17
Precautions: Need to have uniform charges. Must hold out as provider-based to payers.. Treat all Medicare patients alike. Address issues of Medicare managed care and MSP, etc. Identify and address any Stark/Anti-Kickback issues. Consider Federal and State substantially in excess laws. 3 5 Action items: Create a billing system that can switch between generating a 1450 or a 1500 for the same service. Devise a method for grossing up all services to commercial patients. Notify payers of arrangement. Arrange for the transfer of TC payments where necessary. 3 6 Page 18
Other approaches: Make indigence policy more generous Convert clinics to freestanding status For diagnostic services, purchase services under arrangements for Medicare beneficiaries 3 7 3 8 Page 19
Physicians must be able to qualify for, and obtain, hospital privileges Consider whether there are sufficient classes of privileges to accommodate Consider impact on medical staff if perception of lower standards for provider-based clinics Physicians must report up to the medical director of the main provider, and they must refer patients needing inpatient services to the main provider Is another facility closer by? 3 9 Loss of income Stark rules limit payment for ancillary services outside of group practices Is there anything else the physicians can be paid for that supports the hospital s mission? 4 0 Page 20
Employment in a freestanding clinic But lose overhead from main provider Formation of ACO with physician But lose some control over governance 4 1 4 2 Page 21
Hospital outpatient department/non-hospital provider/supplier shared space arrangements Provider-based status final rule Different types of shared space arrangements Time share arrangement Time block arrangement Suites within medical office building Shared reception/waiting area 4 3 July 2011 CMS Chicago RO denial of provider-based request premised in part on fact that outpatient department would share space with a freestanding facility Not appealed; no ALJ decision 4 4 Page 22
4 5 2015 Outpatient Prospective Payment System Final Rule, 79 Fed. Reg. 66770-67034 (Nov. 11, 2014), CMS created new technical and professional billing modifiers designed to track off-campus provider-based physician services. For hospital outpatient claims, as of January 1, 2015, for every hospital outpatient services furnished in an off-campus providerbased department, HCPCS modifier PO Voluntary for 2015, and mandatory after January 1, 2016. Not be required for remote locations, satellite facilities or emergency departments. No reimbursement impact. For professional claims, at some point in the future, CMS will replace POS 22 with 2 new POS codes: Outpatient services furnished in on-campus, remote, or satellite locations of a hospital, and Off-campus provider-based hospital department. CMS will maintain the separate POS code 23 (Emergency room-hospital). 4 6 Page 23
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. 4 7 Our Lady of Lourdes Memorial Hospital, a 242-bed hospital in Binghamton, NY 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. A different perspective on provider-based failures? 4 8 Page 24
Provider-Based Status, Etc. Any Questions? Andrew Ruskin Morgan Lewis & Bockius Lawrence Vernaglia Foley & Lardner LLP 4 9 5 0 Page 25
Medicare Enrollment Application Form CMS- 855A (new 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 5 1 Accept assignment/reject assignment of acquired hospital s Medicare provider agreement? State Survey and Certification Memoranda S&C-09-08 (Oct. 17, 2008) and S&C -13-60-ALL (Sept. 6, 2013) 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 intended to operate facility as a remote location Acquiring hospital declined assignment of acquired hospital s provider agreement CMS refused to recognize remote location until it was successfully surveyed 5 2 Page 26
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 5 3 5 4 Page 27
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 PBDs may also participate in 340B Drug Discount Program if they satisfy certain conditions Covered Entity must include PBD on its Medicare cost report before PBD can be considered for participation 5 5 5 6 Page 28
Different supervision requirements for therapeutic services and some diagnostic tests Outpatient therapeutic services Aid physician in treatment of patient Must be performed in a hospital or PBD 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 5 7 Supervision may be performed by a physician or certain nonphysician practitioner (clinical psychologist, licensed clinical social worker, physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse mid-wife) Services are furnished by or under arrangements by hospital Services are an integral although incidental part of practitioner s services Services are performed in the hospital or in a PBD Services are provided under direct supervision (or other level of supervision as specified by CMS for the particular service) of a practitioner, subject to certain requirements 5 8 Page 29
Supervisory practitioner must be immediately available to furnish assistance and direction throughout the procedure Temporal, but no physical boundary requirement Cannot be so distant that could not intervene right away Cannot be performing another service that cannot interrupt Within State scope of practice; have hospital admitting privileges; and have knowledge, skills, ability, and privileges to perform service More than capacity to respond to an emergency; must be clinically able to personally perform the service 5 9 NEDTS can last a significant period of time; have a substantial monitoring component that is typically performed by auxiliary personnel; have low risk of requiring practitioner s immediate availability after initiation of service; and are not surgical in nature Direct supervision is required during the initiation of service, followed by general supervision at discretion of the supervisory practitioner NEDTS and therapeutic services subject to general supervision available at https://www.cms.gov/medicare/medicare-fee-for- Service- Payment/HospitalOutpatientPPS/Downloads/CY2013- OPPS-General-Supervision.pdf 6 0 Page 30
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 Diagnostic tests furnished to hospital outpatients by entity other than hospital are subject to hospital unbundling rule 6 1 Particular diagnostic test must be performed under the appropriate level of supervision (general, direct, personal) as included in the quarterly updated MPFS RVF Physician must perform supervision, even if NPP is authorized under State law to perform. If direct supervision is required, same conditions as therapeutic services NPP cannot supervise diagnostic test, but when NPP personally performs diagnostic test must meet only Medicare coverage rules for that type of NPP Example: NP must simply work in collaboration with a physician and a PA must practice under a physician s general supervision 6 2 Page 31
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 Immediate availability How is supervisory practitioner contacted Track supervision requirements for different diagnostic tests 6 3 Recoupment of overpayments Violation of Medicare Conditions of Participation for Hospitals Federal False Claims Act knowing retention of overpayments 6 4 Page 32
6 5 Hospital primarily engaged in providing services to inpatients Medicare statute defines a hospital as being primarily engaged in providing services to inpatients CoPs for hospitals require compliance with this definition for Medicare participation purposes Primarily engaged has been the subject of government reports and other documents over the years in context of physician-owned specialty hospitals Government could not define primarily engaged for enforcement purposes without negatively impacting small community hospitals and rural hospitals CMS has issued notices of termination to Medicare-participating hospitals for purportedly failing to be primarily engaged in furnishing services to inpatients Limited guidance regarding interpretation and application of primarily engaged (devotes 51% of beds to inpatient care) Government enforcement on collision course with CMS payment policy incentivizing provision of outpatient services 6 6 Page 33