Knowledge Base Article

Are you tired of hearing about and reading about provider-based departments? If so, sorry, but some governmental agencies (for example, the Office of Inspector General (OIG), the Medicare Payment Advisory Commission (MedPAC), and even Congress) just won’t let it go. This issue is evidently “stuck in their craw” and so the discussion continues, and continues, and continues… This article looks at information from the June 2016 OIG report concerning provider-based facilities.

What Is a Provider-Based Department?

Provider-based status is a Medicare payment designation established by the Social Security Act that allows facilities with a provider-based designation to bill Medicare as a hospital outpatient department and thereby receive higher payments. Provider-based facilities may be on campus (within 250 yards of the main buildings of the main provider) or off campus (more than 250 yards but less than or equal to 35 miles from the main buildings of the main provider). Hospitals and their provider-based departments (PBDs) have to meet specific requirements described in 42 CFR § 413.65 and CMS Transmittal A-03-030. The requirements include practice licensure, integration of clinical services and financial operations, and compliance with nondiscrimination and health and safety rules. In addition, off-campus PBDs must meet requirements for administration, supervision, and location.

Major Concerns – Cost and Increasing Numbers

According to the OIG report, “Medicare often pays over 50 percent more for services performed in provider-based facilities than for the same services performed in a non-hospital based facility (i.e., a freestanding facility). Beneficiaries generally are responsible for higher copayments for most services in provider-based facilities than in freestanding facilities.” In provider-based departments, Medicare makes a payment to the PBD based on Outpatient Prospective Payment System (OPPS) payment rates and a separate payment to physicians for their professional services.

Another concern is the increasing numbers of PBDs. Over the past seven years, there has been a 33% increase in hospital outpatient services including those provided in PBDs. One reason for the increased number of PBDs is that more and more hospitals are purchasing freestanding facilities and converting them to provider-based facilities.

Findings from Previous OIG Audits

In earlier reviews, the OIG found that CMS was not aware of the number of provider-based facilities or the increased cost associated with PBDs without a corresponding benefit. CMS has claimed that PBDs improve quality of care by offering increased beneficiary access and integration of care. CMS also has maintained that increased payments are appropriate to accommodate higher costs resulting from financial and clinical integration. But per the OIG, CMS has yet to provide any evidence provider-based facilities produce specific benefits to justify the higher costs compared to freestanding facilities.

Hospitals may voluntarily attest to provider-based status with supporting documentation required to be submitted to the Medicare Administrative Contractors for off-campus PBDs. The OIG found inconsistent reviews by the Medicare Regional Offices confirming the attestations. The OIG has also found that some physicians are receiving overpayments for services provided in PBDs if they report the incorrect place-of-service (POS) code.

Bottom line is the OIG recommended the complete elimination of provider-based status.

CMS Fixes

CMS did not concur with the OIG recommendation for eliminating provider-based status but did take some actions based on the OIG’s findings. Specifically, CMS

• Produced a set of standards (i.e., 42 CFR § 413.65) for provider-based facilities and entities designed to guard against abuse of the payment system,
• Developed a management information system that contains the results of provider-based reviews and enables CMS to monitor review status, and
• Developed detailed guidance on the proper use of place- of-service codes.

Due to continuing concerns from the OIG, the MedPAC committee, and Congress, CMS created new physician place-of-service codes to distinguish between services performed in on- or off-campus provider-based facilities. Effective January 1, 2016, physicians use place-of-service code 22 for services in on-campus provider-based facilities and place-of-service code 19 for services in off-campus provider-based facilities. Also, voluntary beginning January 2015 but mandatory effective January 1, 2016, CMS requires that hospital claims contain a specific two-digit modifier (modifier PO) for OPPS services furnished in an off-campus PBD.

Another significant development concerning provider-based status is the Bipartisan Budget Act of 2015 (BBA) which mandates that, effective January 1, 2017, only off-campus outpatient departments billing the OPPS for services before November 2, 2015, (grandfathered provider-based facilities) may continue to receive payment under OPPS. New off-campus provider-based facilities will be paid under payment systems equitable with independent and physician office payments. (Be on the lookout in next week’s Wednesday@One for details of how CMS proposes to handle this in the 2017 OPPS Proposed Rule.)

Remaining Problems

Although CMS has taken steps to improve its monitoring of provider-based billing, the OIG details a long list of remaining vulnerabilities related to PBDs, some of which include:

• Grandfathered facilities under the BBA will continue to generally receive higher payments (i.e., payments from both the OPPS and MPFS) for services than if the same services were provided in a freestanding facility (i.e., receiving payment only from the MPFS).
• Some hospital PBDs may be receiving overpayments because they do not meet all the PBD requirements. Due to the voluntary attestation process, CMS is unable to determine whether all provider-based facilities meet requirements to bill at the higher provider-based rate. CMS also reports challenges with the provider-based attestation review process because of difficulties obtaining supporting documentation.
• Some physicians may be receiving overpayments due to reporting of incorrect place-of-service codes. CMS has no means to ensure physicians use the correct POS codes because they do not match the facility component of a claim to the associated professional component of a claim.
• CMS cannot segregate billing by provider-based facilities, which is critical to ensuring appropriate payments and implementation of the BBA of 2015.

OIG Recommendations

The OIG continues to recommend that CMS eliminate provider-based status or equalize payment for the same services provided in different settings. If CMS does not accept these recommendations, the OIG recommends CMS:

• Implement systems and methods to monitor on- and off-campus billing by provider-based facilities to help implement the Bipartisan Budget Act of 2015 and better monitor billing by individual facilities.
• Require hospitals to submit attestations and supporting documentation for all of their provider-based facilities, both on and off campus with a deadline after which Medicare would deny claims for services in provider-based facilities that do not have an attestation on file with CMS.
• Determine how to address the issue of grandfathered facilities that do not meet regulatory requirements after January 1, 2017, and determine whether they may continue billing as provider-based facilities if they later come into compliance.
• Ensure that its regional offices and MACs apply provider-based requirements appropriately when reviewing documentation during their attestations reviews.
• Recover overpayments and take action to ensure hospitals and facilities improperly billing as provider-based do not receive higher provider-based payment in the future until non-compliance is corrected.

Requirements to be a PBD and Documents to Prove It

Hospitals need to understand the requirements for provider-based status, ensure that any on-campus or off-campus facilities for which the hospital is billing as provider-based meets the requirements, and be prepared to furnish appropriate documentation to CMS to support the PBD designation. The OIG report contained valuable information on the requirements and supporting documentation that is summarized below. Hospitals should read the OIG report for complete details of everything discussed in this article.

Requirement: A provider-based facility and the main provider must be operated under the same license, unless State laws prohibit this or require separate licenses.
Supporting Documentation: Copy of the State license or documentation that the State in which the facility is located requires a separate license

Requirement: Integrated clinical services including same clinical privileges, same monitoring and oversight, reporting relationship between PBD medical director and hospital chief medical officer, oversight by hospital medical staff committees, a unified medical records retrieval system, and integrated and fully accessible services.
Supporting Documentation: Information about whether professional staff of the PBD has clinical privileges at the main provider, a copy of the record retrieval policy of the main provider and provider-based facility, and examples of inpatient and outpatient service integration

Requirement: Fully integrated financial operations including costs reporting and financial status.
Supporting Documentation: Appropriate section of a main provider’s cost report or trial balance that show the provider-based facility’s revenues and expenses

Requirement: Provider-based facility is held out to the public and other payers as part of the main provider.
Supporting Documentation: Letterhead with a shared name, websites, and other examples to show that the facility is part of the main provider

Requirement: Compliance with applicable rules related to hospital anti-dumping, nondiscrimination, health and safety, Medicare agreement and Medicare payment.
Supporting Documentation: Copies of anti-dumping and nondiscrimination policies

Requirement (Off-Campus PBD): The hospital main provider must own 100-percent of the provider-based facility, have final responsibility and approval for administrative and personnel decisions, have the same governing body, and operate under the same organizational documents.
Supporting Documentation: Bylaws for the main provider and provider-based facility

Requirement (Off-Campus PBD): Hospital and PBD must have the same frequency, intensity, and level of accountability reporting relationship that exists between the main provider and one of its existing facilities plus additional requirements concerning direct supervision, monitoring, and oversight of the provider-based facility and the integration of administrative functions (e.g., billing services, payroll).
Supporting Documentation: An organizational chart that reflects reporting relationships and a list of the integrated administrative functions

Requirement (Off-Campus PBD): A provider-based facility must be located within a 35-mile radius of the main provider’s campus (with some exceptions).
Supporting Documentation: Maps indicating the location of each facility

Requirement (Off-Campus PBD): When providing treatment to a Medicare beneficiary that is not required by anti-dumping rules, off-campus PBDs must give beneficiaries written notice of potential hospital and physician co-insurance liabilities including an estimate of the amount of the additional liability before delivering the service.
Supporting Documentation: A copy of the form given to patients and a copy of policies regarding distribution of the form

It seems obvious that the discussions and changes regarding provider-based status are not over. So stay tuned for further news and be prepared for what may come.