Earlier this summer, the Centers for Medicare and Medicaid Services (CMS) released the Calendar Year (CY) 2017 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions, and payments rates proposed rule (CMS-1656-P).
One piece of this year’s proposal is to implement Section 603 of the Bipartisan Budget Act of 2015, which will affect how Medicare pays for certain items and services furnished by certain off-campus outpatient departments of a provider (off-campus “provider-based departments” (PBDs)).
Site Neutral Payments Provision (“Section 603”)
This provision, found in the Bipartisan Budget Act of 2015, requires that certain items and services furnished by certain off-campus PBDs shall not be considered covered outpatient department services for purposes of OPPS payment and shall instead be paid “under the applicable payment system,” beginning January 1, 2017. The proposed rule contains several proposals relating to which off-campus PBDs and which items and services are “excepted” from application of payment changes under the provision.
One such issue is the applicable payment system. For CY 2017, CMS proposes the Medicare Physician Fee Schedule (MPFS) to be the “applicable payment system” for the majority of the non-excepted items and services that are furnished in an off-campus PBD. Physicians who perform such services would be paid individually, based on the nonfacility rate under the MPFS for the services which they are permitted to bill. This means that physicians who perform services at an off-campus PBD would be paid directly by Medicare, while the hospital associated with the off-campus PBD, who provided the space, equipment, and staff for the doctor to provide that care, receives no payment from Medicare for their investment in their facility that allowed the physician to participate in the care of the patient (and get paid in the first place!).
CMS presently intends this payment structure to serve as a one-year transitional policy while other solutions are explored, including operational changes that would allow an off-campus PBD to bill Medicare for its services under a Part B payment system other than the OPPS, beginning in 2018.
According to CMS, as long as the hospital can meet all Federal and other requirements, it would have the option of enrolling the non-excepted off-campus PBD as the provider/supplier it wishes to bill in order to meet the requirements of that payment system (such as an Ambulatory Surgical Center (ASC) or group practice).
For CY 2018, CMS is soliciting comments on regulatory and operational changes that it could make to allow a non-excepted off-campus PBD to bill and be paid for its non-excepted items and services under an applicable payment system, other than OPPS.
Why is This a Problem?
This provision strikes us as being a bit problematic, to say the least, as it raises several issues as to fraud and abuse. As an example, these payment rules, if adopted, may force some hospital into financial arrangements with referring physicians that present a substantial compliance risk because essentially, “hospitals and treating physicians would be forced to choose between the substantial legal risk of entering into altered financial arrangement subject to scrutiny as well as potentially significant financial and criminal penalties under the fraud and abuse laws, on the one hand, or disrupting the delivery of patient care on the other.”
Under the Stark Law and the Anti-Kickback Statute, “CMS has long held that providing items or services to a physician of any value greater than $396 in a calendar year (adjusted annually for inflation), or leasing or providing office space, equipment or services to a physician for less than fair market value, can trigger the referral and billing prohibitions of that statute, regardless of intent.”
Typically, Medicare pays physicians at a lower “facility rate” when they practice at these PBDs, because the hospital pays and receives reimbursement for the overhead expenses of providing the service – the building, equipment, staff, medical supplies, etc. This proposed rule would make it so physicians at these PBDs would be paid as if they owned and operated the facility, even though they would not. Therefore, hospitals would be providing physicians with free benefits of reimbursement for PBD services, for which they paid nothing.
According to Jonathan Diesenhaus, a current partner at Hogan Lovells with more than twenty-five years of experience in prosecuting and defending healthcare and government program fraud cases, this is a problem because if the physician and hospital cannot reach an agreement on fair market value for the hospital’s portion, the doctor could be viewed as getting a lot for free. However, this proposal also makes it so that doctors have all the leverage, and in the end, it is possible that it will be patients who lose, as one of the few pieces of leverage the hospital may have it to close the clinic.
Sheree Kanner, also a current partner at Hogan Lovells and former General Counsel for the Centers for Medicare and Medicaid Services, believes that perhaps there is some way, other than through OPPS, for CMS to pay the hospitals directly so these issues of fraud and abuse are not encountered.
Conclusion
Proposed comments were due to CMS at close of business on Tuesday, September 6, 2016. It will be interesting to see how many comments CMS received, suggesting ways to improve the system without causing concerns about fraud and abuse, and whether CMS is able to make any changes before the January 1, 2017 deadline.