Complete Healthcare Compliance Manual

Provider-Based Regulation Definitions

The provider-based regulation applies to all facilities for which provider-based status is sought. The provider-based regulation includes a number of definitions for terms used throughout the regulation. They include:^[8]

• Provider-based status: The “relationship between a main provider and a provider-based entity or a department of a provider, remote location of a hospital, or satellite facility.”

• Freestanding facility: An “entity that furnishes health care services to Medicare beneficiaries and that is not integrated with any other entity as a main provider, a department of a provider, remote location of a hospital, satellite facility, or a provider-based entity.”

• Main provider: The “provider that either creates, or acquires ownership of, another entity to deliver…health care services under its name, ownership, and financial and administrative control.”

• Provider-based entity: A provider of healthcare services “that is either created by, or acquired by, a main provider for the purpose of furnishing health care services of a different type from those of the main provider under the ownership and administrative and financial control of the main provider.” (emphasis added)

• Department of a provider: A “facility or organization that is either created by, or acquired by, a main provider for the purpose of furnishing health care services of the same type as those furnished by the main provider.” (emphasis added)

• Remote location of a hospital: A “facility or an organization that is either created by, or acquired by, a hospital that is a main provider for the purpose of furnishing inpatient hospital services under the name, ownership, and financial and administrative control of the main provider.” It comprises both the physical facility that is the site of service and the personnel and equipment used to deliver the service and does not include a “satellite facility.”

Provider-based entities, departments of a provider, and remote locations of a hospital include the physical facility that serves as the site of services of a type that could be claimed under the Medicare or Medicaid program and the personnel and equipment needed to deliver the services at that facility.

Provider-Based Determinations

The provider-based regulation makes clear that a facility or organization is not entitled to be treated as provider-based just because it believes it is provider-based. Such a facility or organization must meet all of the applicable regulatory requirements in order to be appropriately treated as provider-based. Under current CMS policy, healthcare providers may, but are not required to, seek a determination from CMS that their facilities meet the requirements of the provider-based regulation.

However, CMS will not make determinations of provider-based status for payment purposes for the following types of facilities, since such determinations would not affect either Medicare payment or Medicare beneficiary liability or scope of benefits:^[9]

• Ambulatory surgery centers

• Comprehensive outpatient rehabilitation facilities

• Home health agencies

• Skilled nursing facilities (determinations are made in accordance with 42 C.F.R. § 483.5 instead)

• Hospices

• Inpatient rehabilitation units that are excluded from the inpatient prospective payment system for acute hospital services

• Independent diagnostic testing facilities furnishing only services paid under a fee schedule, facilities that furnish only clinical diagnostic tests (excluding clinical diagnostic laboratories that are parts of critical access hospitals (CAHs)), and facilities that furnish only some combination of these services

• Facilities (except those operating as part of CAHs) furnishing only physician, occupational, or speech therapy to ambulatory patients during any period when the annual payment cap for coverage of such services is suspended by legislation (see Section 1833(g)(2) of the Social Security Act for more information)

• End-stage renal disease facilities (determinations are made in accordance with 42 C.F.R. § 413.174 )

• Departments of providers that perform necessary functions but do not provide services of a type for which separate payment could be claimed under Medicare or Medicaid (examples include laundry and medical records department)

• Ambulances

• Rural health clinics affiliated with hospitals with 50 or more beds

Healthcare providers that seek a determination of provider-based status must submit an attestation to CMS that documents compliance with the requirements of the provider-based regulation. The applicable requirements vary depending on whether the facility is on the campus of the main provider or not and whether the main provider is a hospital. Attestations for off-campus facilities must include documentation supporting the attestations made by the main provider as to how the facility complies with the applicable requirements of the provider-based regulation. While providers are not required to submit an attestation seeking a determination of provider-based status, the advantage to doing so is that CMS approval of the facility as provider-based eliminates the risk of retrospective recoveries should CMS later determine that the facility did not actually meet all of the requirements to be treated as provider-based.

CMS Provider-Based Requirements

The following requirements are applicable to all provider-based facilities and organizations, and all of the requirements must be met to qualify for provider-based status. These requirements expect the provider-based location to act, operate, and look like the main provider does in all that they do in order to be integral to the main provider. Any deviation in how the provider-based location operates from the main provider could jeopardize an organization’s provider-based status, and thus provider-based reimbursement. To help prepare an organization, use the CMS provider-based attestation document that the applicable Medicare administrative contractor (MAC) has posted on its website as a guide to comply with these rules.^[10]

Requirements Applicable to Off-Campus Hospital Outpatient Departments (HOPDs) and Hospital-Based Entities

Special Rules for HOPDs and Hospital-Based Entities to Qualify for Provider-Based Status

EMTALA: The Emergency Medical Treatment and Labor Act, also known as the “anti-dumping” rule, requires all patients be provided a medical screening exam and stabilization of an emergent medical condition and, if necessary, transfer to another facility, regardless of their ability to pay.^[17]

Physician billing using correct POS codes:^[18]

• To assure appropriate payment based on the provider-based location where the services were provided, the correct POS must be appended to the professional claim form (the CMS-1500 claim form).^[19] If the location is an off-campus hospital, POS code 19 would be required, whereas POS code 22 would be used for on-campus hospital. Use of POS code 11 (office) would be inappropriate and would cause an overpayment to the physician.

• When working with independent providers in these locations, expressing this requirement in a written agreement would be advisable to assure these providers understand what type of location they are treating patients at and bill Medicare appropriately.

Provider-based locations of hospitals must comply with the hospitals’ Medicare provider agreements, which incorporate the conditions of participation:^[20] This includes the prohibition about sharing of clinical space and compliance with life safety code as set forth in 42 C.F.R. § 482 .

Compliance with the nondiscrimination requirements must be met by all providers working in the provider-based location:^[21] The main provider should already have a policy in place to assure compliance with 42 C.F.R. § 489.10 , with which the provider-based location must also comply. At a high level, this condition of participation prohibits discrimination based on race, color, national origin, age, and disability.

Must treat all Medicare patients as hospital outpatients:^[22] Patients treated in the provider-based locations must be treated as hospital outpatients at all times; there should not be times where some are treated as physician office and others as hospital outpatients. Remember, hospital space is hospital space 24/7, and this is the same for any type of patient.

Three-day payment window:^[23] Under the three-day payment window rule, any outpatient services provided within three days of a hospital admission must be included on the inpatient claim (i.e., they will not be paid separately). When thinking about provider-based clinics of a hospital, payment for services provided in these locations would be affected by the three-day rule.

Required written notice of beneficiary coinsurance liability:^[24]

• When a patient is treated at an off-campus provider-based location of a hospital, the hospital must provide a notice of coinsurance prior to the service being provided. This notice is to inform the patient that the services they are about to receive will be subject to a coinsurance from both the physician and the hospital and to advise the patient of the amount of the potential financial liability. Many patients are surprised and upset by this when they receive two bills. This is likely one of the biggest issues with provider-based billing—patients feel they are being double-billed.

• If an exact amount of the patient’s potential financial liability is not known, an estimate can be given.

• If the patient is unable to receive the notice, this notice can be given to the patient’s representative.

• If the services provided to the patient were in accordance with EMTALA, the notice can be given after the patient has been stabilized.

Additional Provider-Based Requirements Depending on Particular Facts

Medicare Payment Implications of Provider-Based Status for HOPDs and Hospital-Based Entities

As mentioned previously, Medicare payments for services furnished in provider-based clinics and departments of hospitals were historically often significantly higher than payments for the same services furnished in a freestanding facility or physician office. This payment differential was a motivation for hospitals to designate off-site locations (often physician offices) as provider-based to the hospital. But this payment differential also often resulted in higher beneficiary coinsurance liability, because two claims are submitted to Medicare—one by the hospital and one by the physician or other professional—both of which carry beneficiary coinsurance liability, which in most cases is 20% of the Medicare payment.

In light of the higher Medicare reimbursement for these services furnished in provider-based locations and the higher beneficiary costs, provider-based status has been targeted for review and reform in recent years. Dating back to 1999, the Office of Inspector General (OIG) has expressed concerns about and identified vulnerabilities associated with the provider-based status designation.^[28] These include oversight challenges and increased costs to Medicare and its beneficiaries, with no documented benefits. Although CMS had taken some steps to address concerns raised by the OIG over the years, it was Section 603 of the Bipartisan Budget Act (BBA) of 2015 that truly changed the course for hospital provider-based departments.^[29] Section 603 of the BBA applies to any provider-based off-campus departments that were not billing as a hospital department as of November 2, 2015 (the effective date of the 2015 BBA). As a result, effective January 1, 2017, any hospital off-campus outpatient departments that were not billing Medicare as a hospital department under the OPPS as of November 2, 2015, are subject to “site-neutral” payments, meaning that the hospital’s services are not reimbursable under the OPPS and will instead be paid under another system, the Medicare physician fee schedule.^[30] However, the BBA of 2015 carved out certain exceptions to this site-neutral payment rule, allowing certain off-campus hospital outpatient departments to continue to receive the higher OPPS payments. As of January 1, 2017, no off-campus hospital outpatient department may be paid under the Medicare OPPS unless (i) it is a dedicated emergency department (DED), and (ii) it is excepted.^[31]

All services furnished at DEDs continue to be reimbursed under the OPPS. For purposes of the provider-based rule and OPPS reimbursement, a DED is defined by the EMTALA definition as:^[32]

• Licensed by the state as an emergency room or emergency department,

• Held out to the public as a place that provides care for emergency medical conditions on an urgent basis without requiring an appointment, or

• Providing at least one-third of all of its outpatient visits for the treatment of emergency medical conditions.

The 21^st Century Cures Act (Cures Act),^[33] which was signed into law on December 13, 2016, revised Section 603 of the BBA of 2015 and established three new exceptions to the site-neutral payment rule established in the BBA of 2015 for off-campus hospital provider-based locations.^[34][35] The first exception addressed off-campus provider-based departments that were under development but not billing as provider-based for services as of November 2, 2015 (the effective date of the BBA of 2015) and submitted a voluntary provider-based attestation to CMS before December 2, 2015.^[36] This category of off-campus provider-based departments was only temporarily grandfathered and able to continue OPPS payments through 2017.

The second exception was for off-campus provider-based departments that were “mid-build” as of November 2, 2015.^[37] Under the Cures Act, “mid-build” meant that the provider entered into a binding written agreement with an unrelated third party for the actual construction of an off-campus provider-based department prior to November 2, 2015. These off-campus provider-based departments were permitted to bill for services under the OPPS as of January 1, 2018, if they:^[38]

• Submitted a certification to CMS from their chief executive officer or chief operating officer by February 13, 2017, certifying that the off-campus provider-based department met the definition of “mid-build.”

• Submitted an attestation to CMS by February 13, 2017, stating that the off-campus provider-based department meets the requirements of being provider-based.

• Added the new off-campus provider-based department to the hospital’s Medicare enrollment form. 

Many hospitals took advantage of the mid-build exception and submitted the required certification and attestation and added the new off-campus provider-based department to their Medicare enrollment form. In early 2021, CMS issued determinations on whether those hospital off-campus departments qualified for the mid-build exception and were eligible to receive OPPS reimbursement.^[39]

The third exception from the Cures Act added an exemption for certain cancer hospitals as long as the cancer hospital submitted an attestation to CMS within 60 days of the latter of either February 13, 2017, or the date the cancer hospital met the provider-based requirements.^[40]

Excepted versus Nonexcepted Status

What does it mean to be “excepted” for purposes of the provider-based rule and OPPS reimbursement? Excepted provider-based locations are:^[41]

• Off-campus HOPDs that were furnishing OPPS services prior to November 2, 2015, that have not impermissibly relocated or changed ownership;

• Off-campus HOPDs that qualify under the mid-build or cancer hospital exception; and

• HOPDs on the campus or within 250 yards of the main hospital or a remote location of a multi-campus hospital.Note: Remote locations are considered off-campus of the main hospital, but locations within the distance (i.e., within 250 yards) of a remote location are excepted.

If an excepted HOPD loses its excepted status for any reason, it will not be able to regain excepted status and will no longer be eligible for OPPS reimbursement.

Effect of Relocation on Excepted Status

As indicated previously, off-campus HOPDs that were furnishing OPPS services prior to November 2, 2015, that have not impermissibly relocated are considered excepted. The BBA of 2015 did not address whether excepted off-campus HOPDs can physically relocate and keep excepted status, but CMS (based on its belief that the intent of the BBA of 2015 was to except only off-campus HOPDs as they existed prior to November 2, 2015) stated in the 2017 Medicare OPPS final rule that if an excepted off-campus hospital outpatient department moved from the address on its CMS enrollment form as of November 1, 2015, to a new address, including a change of unit or suite number, the entire off-campus HOPD loses its excepted status.^[42]  CMS finalized a limited exception for relocation of excepted off-campus provider-based departments due to extraordinary circumstances, such as natural disasters and seismic building code requirements for public health or public safety reasons but not for business reasons such as loss of lease.^[43] To use this exception, hospitals must submit a request for an extraordinary circumstances relocation request to CMS within 30 days of the date the “extraordinary circumstance” occurred.^[44] The CMS Regional Offices have responsibility for approving/denying these relocation requests.^[45]

Effect of Change of Ownership on Excepted Status

Changes of ownership can also affect a provider-based HOPD’s excepted status. Excepted off-campus HOPDs that undergo a change in ownership will retain their excepted status and continue OPPS payments if:^[46]  

1. The same entity acquires the entire hospital, including the off-campus provider-based department, and

2. The new owner accepts assignment of the hospital’s Medicare provider agreement.

An excepted off-campus HOPD cannot be transferred from one hospital to another and maintain excepted status. In addition, if an operator combines two certified entities under one provider number, the off-campus HOPDs of the nonretained hospital would lose excepted status.

Medicare Billing and Reimbursement for Services Provided in Excepted and Nonexcepted Provider-Based Departments of Hospitals

As noted previously, on-campus HOPDs and excepted off-campus HOPDs are paid by Medicare under the OPPS for most services. Since CMS does not maintain a list of excepted and nonexcepted HOPDs, excepted off-campus HOPDs must affix the PO modifier to their claims to indicate their excepted status, even if the particular service being billed isn’t paid under the OPPS or there’s no payment difference for the particular item or service.^[47] Nonexcepted off-campus hospital outpatient departments are paid at the lower rate under the Medicare Physician Fee Schedule and must add the PN modifier to their claims to indicate their nonexcepted status. CMS expects hospitals to report the PN modifier with each nonexcepted line item and service including those for which payment will not be adjusted, such as separately payable drugs, clinical laboratory tests, and therapy services.

The most commonly billed HOPD code under the OPPS is G0463 (hospital outpatient clinic visit for assessment and management of a patient). Historically, this code paid significantly more than the equivalent office visit codes under the Medicare Physician Fee Schedule. In November 2018, CMS released the 2019 OPPS final rule finalizing its proposal to make payments for clinic visits “site-neutral” by reducing payments for clinic visits in excepted hospital off-campus provider-based departments by 60%, which is the Medicare Physician Fee Schedule equivalent rate and the same rate it currently pays for the clinic visits furnished in nonexcepted off-campus hospital outpatient departments.^[48] The payment reduction was phased in so that payments for the G0463 code were reduced by half of the total reduction in 2019 (equal to payment at 70% of the OPPS rate) and again by half of the total reduction in 2020 (equal to 40% of the OPPS rate).^[49]

Options for Expanding Hospital Outpatient Services

With the inability to open new provider-based HOPDs that are reimbursed by Medicare under the OPPS since the passage of BBA of 2015, hospitals have looked for ways to provide more services in their existing provider-based locations and still be paid under the OPPS. What can hospitals do to expand their outpatient hospital services outside the four walls of the hospital?