Outpatient Encounter FormNow that the rule is out, work to implement the BBA changes begins in earnest.

CMS commemorated the one-year anniversary of the Bipartisan Budget Act of 2015 (BBA) with the traditional gift of paper, offering long-awaited guidance to hospitals on how the agency will implement the site-neutral payment policies of BBA Section 603 in the CY 2017 Hospital Outpatient Prospective Payment System (OPPS) final rule. Section 603 addresses the differential in reimbursement to providers based on whether a location is operated as a provider-based hospital outpatient department, paid under the higher OPPS rates, or a freestanding facility. Effective January 1, 2017, the BBA limits billing under the OPPS to “excepted” departments.

The final rule does not offer hospitals reprieve from the impending reimbursement shift or extend grandfathered status to departments that were “mid-build” when the BBA was enacted. But it does provide clarity and answers on key questions including how to submit claims, reimbursement rates under applicable payment systems, and changes that will terminate the grandfathered status of excepted departments. And it responds to comments of industry stakeholders, including the American Hospital Association, urging CMS to rethink some of the policies set forth in the proposed rule, though it does not go as far as many had hoped.

Wait Is Over but Work Continues

Now that the rule is out, work to implement the BBA changes begins in earnest.

  • CMS still has work to do. While the agency finalized a temporary policy to reimburse non-excepted items and services during the next year under the Medicare Physician Fee Schedule (MPFS), it acknowledged the need to adapt its systems to allow for payments under applicable payment systems thereafter. In addition to the final rule, CMS also issued an interim final rule with comment period to establish the MPFS payment rates for items and services billed by non-excepted departments starting January 1.
  • Congress also has work to do if additional relief will be afforded. In June, the U.S. House of Representatives passed H.R. 5273, the Helping Hospitals Improve Patient Care Act, which included, among its many provisions, potential relief for cancer hospitals and hospitals that can certify a new off-campus department was “mid-build” when the BBA was enacted. It is unlikely these hospitals will qualify for excepted or grandfathered status unless there is movement on this bill in the Senate during the lame-duck session.
  • But hospitals have the most work ahead, evaluating how to operate excepted departments in a manner that maintains OPPS billing rates, preparing to bill for items and services provided in non-excepted departments starting January 1 and monitoring compliance. An overview of key focus areas is provided below.

Identifying Excepted Departments

The final rule defines excepted hospital departments to include:

  • Dedicated emergency departments. The final rule provides that all items and services (not just emergency services) furnished in an emergency department satisfying existing regulations may be paid through the OPPS.
  • Departments “on the campus” or within 250 yards of the hospital or remote location of the hospital. CMS recognized that the BBA added significantly more focus and attention on provider-based criteria, including the definition of “campus,” but indicated it will continue to defer to the regional offices to make case-by-case determinations of what constitutes a main campus. CMS did clarify that the measurement of 250 yards from a remote location is made from any point of the physical facility.
  • Grandfathered off-campus departments. CMS expanded its interpretation of the BBA to except off-campus departments that furnished a covered service prior to November 2, 2015, even if claims were timely submitted after the BBA enactment date.

No guidance by CMS was provided in the final rule or during the November Hospital Open Door Forum on whether the BBA payment and certification provisions would be applied as strictly to entities that primarily are engaged in providing Medicaid items and services. CMS punted to the states for direction, but the conservative approach is to assume the BBA applies unequivocally.

Maintaining Status of Excepted Departments

The final rule provides little flexibility on facts and circumstances outside a hospital’s control that could endanger the excepted status of a department. But CMS backed away from an admittedly complex and burdensome proposal to limit expansion of services in excepted departments to items and services in the same clinical family.

  • Relocation. As a general rule, an off-campus department will lose its excepted status if it relocates from the physical address (including the unit number) listed on its enrollment form as of November 1, 2015. CMS expressed concern that a broader relocation policy could create an unintentional loophole undermining the intent of the BBA by allowing relocation to larger facilities with different equipment and staff and unbridled expansion of service lines. The final rule adopts an exceptions process to allow relocation for extraordinary circumstances outside the hospital’s control, such as natural disasters, significant seismic building code requirements, or significant public safety issues.  Exceptions will be evaluated on a case-by-case basis by the regional offices and this opportunity for dialogue may allow hospitals to educate staff on community needs. CMS signaled that it may issue subregulatory guidance to address technical details.
  • Change of Ownership. Excepted status of an off-campus department is transferrable to a new owner only if the new owner becomes the owner of the main provider and accepts the Medicare provider agreement.  Excepted status is lost for an individual excepted department that is sold and if the provider agreement is terminated.
  • Expansion of Services. As a bright spot in the rule for hospitals (and CMS staffers), CMS declined to limit an excepted department to billing for items and services within defined “clinical families”  it billed for under the OPPS during some period prior to the BBA’s enactment. CMS acknowledged the proposed policy could be operationally complex and burdensome but expressed its intent to monitor service line growth and, if appropriate, adopt a limitation on expansion in future rulemaking. The final rule includes a specific request for comments on a policy to limit OPPS payment to the types of services furnished and billed prior to November 2, 2015. CMS intends to monitor for shifts of services from non-excepted to excepted off-campus departments and the final rule imposes specific reporting requirements on providers related to additions and changes to excepted departments.

Getting Paid for Non-Excepted Services

The BBA provides that non-excepted departments will be paid under applicable Medicare Part B payment systems other than the OPPS. In the proposed rule, CMS identified the MPFS as the applicable payment system, with some exceptions, but proposed no mechanism for hospitals to directly bill for services under this payment system. In its interim final rule, CMS found a workaround for its systems issues. Starting January 1, hospitals will be able to submit claims on the institutional UB-04 form with the modifier “PN” to signify the services were provided in a non-excepted department.  CMS will establish new MPFS rates, which for 2017 will be about 50 percent of the OPPS rate for each non-excepted item or service, with some exceptions. CMS acknowledged that even this is a temporary solution. In the meantime, hospitals may elect to enroll a non-excepted facility as a freestanding facility or supplier to bill non-excepted items and services under the MPFS. Hospitals should keep in mind that billing and enrollment changes may have a ripple effect, impacting licensure requirements, private payer reimbursement and other matters.

Evaluate, Monitor and Stay Tuned

Hospitals will need to evaluate and monitor their operations to maximize reimbursement under the BBA. Providers should assess the status of facilities as excepted departments and track their services, educate strategic planning and real estate personnel on the impacts of changes to excepted departments and work with their revenue cycle and billing teams toward reimbursement of non-excepted departments under other applicable payment systems. Refinements and additional guidance will be forthcoming so hospitals should stay tuned.

CMS is accepting comments on its interim final rule through December 31, 2016.  And while congressional action may be a long shot, anything is possible in politics.