Knowledge Base Article

There are some things in America’s healthcare system that just seem wrong – for example, the unreasonable and escalating price of prescription drugs and the significant increase in healthcare premiums. But like Newton’s third law, for every opinion of wrong, there is an equal and opposite opinion that it is not wrong. Neither the drug companies nor healthcare insurers think their prices or premiums are unreasonable or wrong. There have been concerns over the past few years about the rates Medicare and Medicare patients pay for services furnished in provider-based departments (PBDs) of hospitals. Medicare, Congress, and many others think it is wrong that services in PBDs cost significantly more than the same services provided in a physician’s office setting. Hospitals, on the other hand, understand that these PBDs must comply with the myriad of regulations that apply to hospitals which increases the costs of operation of these locations.

But Congress has the power to make laws and in Section 603 of the Bipartisan Budget Act of 2015, the law requires that “new” off-campus hospital provider-based departments no longer be paid the higher payment rates of the Outpatient Prospective Payment System (OPPS), but instead be paid under a different payment system whose rates are more equitable with physician office rates. In the 2017 OPPS Final Rule, CMS provides instructions on the implementation of this requirement to be effective January 1, 2017 as mandated by the Act.

Before getting into the instructions, here is a reminder of the “new” words CMS is using to describe these services. Services and facilities that are an exception from the new payment requirements – that is the new payment system does not apply to them and they will continue to be paid under OPPS are referred to by CMS as “excepted” services/facilities. “Nonexcepted” services are services without an exception to the new rule, so the new payment method applies to nonexcepted services and nonexcepted locations.

The first thing to consider is to what facilities and services does the law apply and what facilities and services are excepted from the requirements. Excepted facilities will continue to be paid under the OPPS payment system and include:

• On-campus hospital provider-based departments
• Provider-based departments on the campus of or within 250 yards of a remote location of a hospital
• Services provided at a dedicated emergency department
• Off-campus hospital provider-based departments that were furnishing services prior to November 2, 2015 and billed for those service within timely filing limits – note that this is a change from the wording of the proposed rule which stated that only off-campus PBDs that were billing for services prior to November 2, 2015 were exempt.

So this means the new payment system applies to new off-campus hospital provider-based departments that began furnishing and billing for services on or after November 2, 2015.

There are some circumstances where an off-campus PBD that is currently excepted could lose its exception status. If an existing off-campus PBD relocates, it will no longer be excepted and will be paid under the new payment system. The only rare and limited exception to this relocation rule is if the relocation is due to extraordinary circumstances outside the hospital’s control such as natural disasters. CMS did not finalize the rule that PBDs would lose their exception status if they expanded their service line and offered new types of services. Also the excepted status for an off-campus PBD can be transferred to a new owner if ownership of the main provider is also transferred and the Medicare provider agreement is accepted by the new owner.

One of the biggest issues that CMS had to work out was how to pay for services provided at non-excepted off-campus PBDs. You may remember they proposed to pay only the physicians at a non-facility rate for these services and provide no payment to the hospital. Due to concerns about this proposal resulting in potentially inappropriate hospital/physician financial relationships that might implicate the physician self-referral law and Federal anti-kickback statute, they came up with another option. Hospitals will continue to bill on an institutional claim form (UB) and will append a “PN” modifier to services provided in a non-excepted off-campus PBD. Medicare will make payment to the hospital under the Medicare Physician Fee Schedule (MPFS) at new rates established for this purpose. These rates are set at 50% of the OPPS payment rates. The packaging requirements of OPPS will apply to these services (such as comprehensive APCs, packaged and conditionally packaged services). Also services assigned to an OPPS status indicator of “A” will continue to be paid under the “other” fee schedule by which they are currently paid. This includes therapy services paid under the MPFS, laboratory services when separate payment criteria is met under the Clinical Lab Fee Schedule, separately payable drugs at ASP + 6%, preventive services, etc.

A few other things to know about the new payment system are:

• Partial hospitalization program (PHP) will be paid at the same rate as Community Mental Health Centers (CMHCs)
• Physicians will be paid their professional fee at facility rates
• Hospitals will bill clinic visits at nonexcepted off-campus PBDs with HCPCS code G0463 which will be paid at 50% of the OPPS rate
• Hospitals will report radiation treatment delivery procedures with the HCPCS “G” codes appended with the PN modifier, which will be paid at the MPFS technical component rate
• The following adjustments are not being adopted into the new payment system - outlier payments, the rural sole community hospital (SCH) adjustment, the cancer hospital adjustments, transitional outpatient payments, the hospital outpatient quality reporting payment adjustment, and the inpatient hospital deductible cap to the cost-sharing liability for a single hospital outpatient service
• The supervision rules that apply for hospitals will continue to apply for off-campus PBDs that furnish nonexcepted items and services
• Beneficiary cost-sharing under MPFS of 20% will apply

CMS states they will likely continue this payment method through 2018. At that time, they may develop a different payment methodology, likely similar to their original proposal.

Whether you think it is wrong or right, this is the payment method for new off-campus PBDs we are stuck with for now. I encourage all affected providers to read the details in the final rule (beginning on page 569 of the display copy) and submit comments to CMS when allowed. CMS did make several concessions based on the comments they received from the proposed rule and submitting comments is one way to let your opinion be known and hopefully heard.