Knowledge Base Article

There has been a lot of discussion and contention lately about hospital off-campus provider based departments (PBDs). And as with a lot of things, the issue boils down to money. Services provided in off-campus PBDs are paid by Medicare at a higher reimbursement rate than similar services provided in freestanding clinics or physicians’ offices. CMS attributes the higher facility payment as compensation to hospitals for higher overhead costs required to operate the provider-based clinic, which is more highly regulated than the freestanding physician clinic locations. This is because hospitals, including off-campus PBDs, are required to meet the conditions of participation, to maintain standby capacity for emergency situations, and to be available to address a wide variety of complex medical needs in a community. That argument seems to no longer be holding up under the increased scrutiny of the OIG, the Medicare Payment Advisory Commission, and others concerned with high medical costs. This is evidenced by several new developments related to off-campus PBDs.

First, effective January 1, 2016, hospitals are required to report a PO modifier on outpatient services provided in an off-campus provider based department. This requirement was finalized in the 2015 OPPS Final Rule which allowed voluntary reporting of the PO modifier for 2015 but mandates use of the modifier beginning in 2016. The use of the PO modifier will allow CMS to track the volumes and types of services being provided in off-campus provider based departments. Things to know about reporting the PO modifier include:

• Off-campus means provider based departments located 250 yards or greater from the main provider building.
• Per discussion at a CMS Hospital Open Door Forum, the modifier is only required to be reported for items and services paid under OPPS. Services paid under another fee schedule, such as rehabilitative therapy services, do not require the PO modifier.
• The modifier should not be reported for remote locations of a hospital, satellite facilities of a hospital, or for services furnished in an emergency department.
• Remote location is another main provider furnishing inpatient services under the name, ownership, and administrative and financial control of the main hospital.
• A satellite facility is a part of a hospital that provides inpatient services in a building also used by another hospital, or in a building(s) located on the same campus as buildings used by another hospital.

Second, the Office of Inspector General continues to examine issues concerning provider-based status as part of their 2016 Work Plan.

• The first issue involves Medicare oversight of provider-based status in which the OIG will determine:
• The number of provider-based facilities that hospitals own,
• The extent to which CMS has methods to oversee provider-based billing,
• The extent to which provider-based facilities meet requirements described in 42 CFR Sec. 413.65 and CMS Transmittal A-03-030, and
• Whether there were any challenges associated with the provider-based attestation review process.

Per the OIG discussion, “Provider-based status allows facilities owned and operated by hospitals to bill as hospital outpatient departments. Provider-based status can result in higher Medicare payments for services furnished at provider-based facilities and may increase beneficiaries’ coinsurance liabilities. The Medicare Payment Advisory Commission (MedPAC) has expressed concerns about the financial incentives presented by provider-based status and stated that Medicare should seek to pay similar amounts for similar services.”

• The second issue is an OIG comparison of Medicare payments for physician office visits in provider-based clinics and freestanding clinics to determine the difference in payments made to the clinics for similar procedures and assess the potential impact on Medicare of hospitals' claiming provider-based status for such facilities.

Third and the most significant news related to PBDs is the Bipartisan Budget Act of 2015 which changes the method of reimbursement for off-campus PBDs beginning in 2017. This Act which was signed into law on November 2, 2015, excludes payment of services under OPPS for services furnished on and after January 1, 2017 in an off-campus provider based department, with a couple of exceptions. The exceptions are:

• Grandfathered off-campus PBDs – that is those off-campus PBDs that were billing under the OPPS prior to the date of enactment of the law - November 2, 2015, and
• Items and services provided in a dedicated Emergency department.

Therefore, beginning in 2017, non-emergency services performed at off-campus PBDs that are not “grandfathered” will be paid under the applicable payment system, such as the Ambulatory Surgical Center Payment System or the Physician Fee Schedule instead of under OPPS.

Hospitals need to be aware of all the new requirements, oversight, concerns, and changes for provider-based departments. They may need to reevaluate acquiring or opening new off-campus provider based departments in light of the change in expected reimbursement. Hopefully this will not affect the availability of outpatient services in areas where they are needed. That would be a shame because sometimes healthcare is about more than the money.