provider-based status, under arrangements, and … (pbd) of the hospital to hospital patients ......

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By

Thomas E. Dowdell* Catherine T. Dunlay*Fulbright & Jaworski L.L.P. Taft Stettinius & Hollister LLPTelephone: (202) 662-4503 Telephone: (614) 220-0236Email: [email protected] Email: [email protected]

*This presentation is for informational purposes only and does not constitute legal advice.

AMERICAN HEALTH LAWYERS ASSOCIATION

Institute on Medicare and Medicaid Payment Issues

Provider-Based Status, Under Arrangements, and Related Medicare Principles and

Requirements

March 20-22, 2013Baltimore, MD

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Overview Provider-based status, under arrangements,

enrollment/CHOW, 340B drug discount program, practitioner supervision, anti-fraud and abuse, and other federal requirements that may apply to hospital outpatient services

Outpatient provider-based services and outpatient under arrangements services

Provider-based status principle and requirements

Under arrangements principle and requirements

Enrollment/Change of Ownership (CHOW) issues Medicare outpatient services supervision requirements Anti-Kickback Statute and Stark Law Recent developments

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Types of Hospital Services

Services furnished in a provider-based department (PBD) of the hospital to hospital patients

Services furnished “under arrangements” to hospital patients in a PBD or outside the hospital

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Compare Provider-Based Services to Hospital Under Arrangements Services

Provider-based services are furnished in a PBD that complies with the applicable provider-based status requirements Provider-based regulatory requirements first

effective in 2000 (previously included in a Medicare manual and thereafter in a Program Memorandum)*

Requirements apply to a facility/location, not a specific service*

Apply for Medicare and Medicaid payment purposes*

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Compare Provider-Based Services to Hospital Under Arrangements Services

Hospital under arrangements services furnished within or outside a hospital (but remember coverage requirements)* Under arrangements coverage permitted under

the Medicare statute since 1966* Payment to the hospital for the service

discharges the patient’s liability Conditions apply to services, not a

facility/location* Medicare only?*

Significance of Provider-Based Status

Medicare Conditions of Participation (S&C-12-17-Hospitals (Feb. 17, 2012) CMS promulgated a new policy for practitioners ordering hospital outpatient services)*

Payment amounts (limitations now apply to outpatient department therapy services)*

Coverage* Commercial payers*

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Significance of Provider-Based Status (cont.)

Medicare billing (two bills/one bill)

Hospital outpatient unbundling rule

Physician incident to services

340B discount drugs program

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What Is Provider-Based Status?

General Rule – Requirements apply if status as provider-based or freestanding affects Medicare payment amounts or beneficiary liability for services furnished therein “On campus”-within 250 yards of hospital’s main

buildings* “Main buildings” not defined

Facility with inpatient acute care beds

How measured?* Exterior wall of hospital main building

Main door of main provider to main door of provider-based facility

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Provider-Based Requirements –Specifically (42 C.F.R. §413.65)

On-campus and off-campus facilities

Licensure – Main provider and facility are operated under the same license (except if the State requires separate licensure or prohibits common licensure)*

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Specific Requirements

On-campus and off-campus facilities (cont.) Clinical Services

Professional staff of the facility have clinical privileges at the main provider

Differentiation in privileges?*

Exclusive physician contracts?*

Medical staff committees at the main provider are responsible for medical activities in the facility

Medical records are integrated

Inpatient and outpatient services are integrated

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On-campus and off-campus facilities (cont.)

Financial integration – financial operations of facility are fully integrated within financial system of main provider

Public aware of hospital-facility relationship (system awareness insufficient) Signage is a critical factor

Shared space arrangements (2011 negative determination)*

Provider-based obligations, including EMTALA

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Additional requirements that apply only to off-campus facilities Operation under the ownership and control of the

main provider Provider solely owns facility Common governing body Common organizational documents Main provider has final responsibility for

administrative decisions

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Off-campus facilities (cont.)

Administration and supervision

Facility is under direct supervision of the main provider

Same monitoring and oversight

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Off-campus facilities (cont.)

Location

35-mile radius

75/75 patient population tests

75% of facility’s patients reside in same zip code areas as 75% of main provider’s patients

75% of facility’s patients who require inpatient care received such care from main provider

Rural children’s hospital neonatal intensive care unit

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Provider-Based Obligations

EMTALA

Physician services must be billed with correct place of service (POS) indicator (POS 22 outpatient/11 clinic)*

Hospital outpatient departments must treat all Medicare patients for billing purposes as hospital outpatients (remember public awareness standard requires a department to be “held out to the public and to other payers” as part of the hospital)*

Hospital outpatient department must comply with Medicare three-day payment window rule*

Outpatient department must meet applicable hospital health and safety rules, including Life Safety Code

Hospital COP – Physical Environment (42 C.F.R. § 482.41)

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Standard – hospital must meet the applicable provisions of the 2000 edition of the Life Safety Code of the National Fire Protection Association (NFPA)

Exceptions CMS determines that State law adequately protects

patients Waiver if LSC application would result in unreasonable

hardship

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Hospital COP – Physical Environment

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12/17/2010 Letter from Director, Survey and Certification Group, to State Survey Agency Directors (S&C-11-05-LSC) (as revised 2/18/2011)

Amends SOM and certain appendices Non-contiguous facilities

Life Safety Code

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Mixed occupancy classifications* Hospital “component facility” must be

adequately separated from the other building occupancies in order to be eligible for its own occupancy classification

If not adequately separated, the most stringent occupancy classification applies to the entire building

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Life Safety Code

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Three LSC classifications*

Health Care Occupancy (most stringent)

Patients who are mostly incapable of self-preservation during an emergency

24/7

Sleeping accommodations

Life Safety Code

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Ambulatory Health Care Occupancy

Patients who are mostly incapable of self-preservation during an emergency

Not 24/7

No sleeping accommodations

Anesthesia services

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Life Safety Code

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Business Occupancy (least stringent)

Patients who are mostly capable of self-preservation during an emergency

Not 24/7

No sleeping accommodations

Does not provide anesthesia services

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Management Contracts Principle

Only applies to off-campus facilities subject to the provider-based requirements that are operated under a management contract

Main provider (or an organization that also employs the staff of the main provider and that is not the management company) must employ the staff who are directly involved in the delivery of patient care*

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Management Contracts Principle

Exceptions

Personnel solely furnishing administrative services

Professionals who furnish patient care services of a type that would be paid under a fee schedule established under Part 414 (physicians, non-physician practitioners)

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Under Arrangements Principle

Provider-based status is not permitted for any facility or organization that provides all of its patient care services under arrangements*

Intended to prevent hospital from using under arrangements coverage provisions to circumvent provider-based requirements

Hospital may not contract out entire department and claim it as provider-based

Unlike management contract principle, no distinction between on-campus and off-campus facilities or organizations*

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Joint Ventures Principle Facility operated as a joint venture may be considered

provider-based if certain conditions are met: Facility is partially owned by at least one provider Facility is located on the main campus of a provider who is

a partial owner (does not have to be the majority owner) Facility is provider-based to the provider on whose campus

the facility is located Facility satisfies all applicable provider-based requirements,

including the financial integration requirement (shared income and expenses, facility costs reported in hospital cost center, and facility’s status incorporated and readily identified in hospital’s trial balance)*

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Provider-Based Attestation

Favorable provider-based determination by CMS is no longer expressly required*

Benefits of seeking a determination Limit overpayment exposure forward (at least until

the occurrence of a “material change” that results in non-compliance)*

Appears to limit overpayment exposure backward to complete attestation submission date and not to all cost periods subject to reopening (transmittal/reg)*

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Provider-Based Attestation

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Off-campus PBD primarily furnishing services regularly performed in a physician’s office; regs include presumption that facility is freestanding unless “CMS determines the facility has provider-based status”)*

Joint venture PBDs* Off-campus PBDs subject to a management

contract* PBDs in which under arrangement services are

furnished*

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Hospital Services Furnished “Under Arrangements”

Hospital contracts with a third party vendor to provide services to hospital patients

Service is billed by the hospital as a hospital service but performed by the vendor

Vendor is paid a fee by the hospital and agrees to look solely to the hospital for payment

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Under Arrangements Principle, Coverage and Payment Conditions

Hospitals expressly permitted since 1966 to furnish items and services to patients through arrangements with third parties under the Medicare statute, regulations and manual provisions (42 U.S.C. §1395x(w); 42 U.S.C. § 1395x(b)(3); 42 C.F.R. §409.3; Medicare General Information, Eligibility and Entitlement Manual (Pub. 100-01), Chapter 5, § 10.3)*

Payment of the hospital must discharge liability of beneficiary or any other party to pay for the items and services

Hospital cannot “merely serve as a billing mechanism”

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Under Arrangements

CMS has stated that a hospital furnishing “under arrangements” services only applies to a hospital obtaining “specialized health care services that it does not itself offer and that are needed to supplement the range of services that the provider does offer its patients” (67 Fed. Reg. 49981, 50091 (Aug. 1, 2002))*

This purported limitation is not included in the Medicare statute, regulations or manuals*

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Under Arrangements

Effective for cost reporting periods on or after October 1, 2013, routine services furnished under arrangement outside of a hospital are not recognized for Medicare payment purposes*

Room and board, dietary and nursing services Result? The only services performed under

arrangement outside hospital for hospital patients that are recognized for Medicare payment purposes are diagnostic tests*

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Under Arrangements

Hospital exercises professional responsibility over arranged for services Accept patient for treatment in accordance with

admission policies Maintain complete and timely clinical record on

patient Maintain liaison with attending physician regarding

patient’s progress Hospital’s utilization review and quality assurance

programs apply to the service*

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Medicare Enrollment/Certification Medicare Enrollment Application Form CMS-855A

(new practice location) CMS acceptance does not indicate that agency has

determined that the facility meets the provider-based status requirements

SOM 2004 and 2024, and S&C-09-08 (Oct. 17, 2008) Remote location addition with acceptance of seller’s

provider agreement (seller’s CCN is “retired”) does not necessarily require a survey except if inpatient and/or surgical services are furnished

If facilities accredited, accreditation can’t be extended to acquirer who rejects provider agreement; new survey must be conducted and no billing privileges until survey performed and compliance determination made

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Medicare Enrollment/Certification Accept assignment/reject assignment of seller

hospital’s Medicare provider agreement?* Mission Regional Hospital Medical Center v.

Centers for Medicare and Medicaid Services, Dec. No. CR2458 (Nov. 2, 2011)* Hospital acquires assets of another hospital and

intends to operate acquired hospital as a remote location

Acquiring hospital expressly declined assignment of acquired hospital’s provider agreement

CMS refused to recognize remote location until it was successfully surveyed

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Medicare Enrollment/Certification

The Joint Commission Accreditation

Match between Joint Commission accreditation and hospital CCN

Multi-campus hospital (one CCN) must have one governing body, one unified medical staff and a common nursing staff

CMS revised governing body CoP to allow a multiple-hospital system (more than one CCN) to have one governing body*

CMS declined to allow a multi-hospital system to have a single medical staff*

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Medicare Enrollment/Certification

CMS adopted, delayed enforcement, and has proposed to remove a requirement that at least one medical staff member be included on the governing body

CMS has proposed requiring the governing body to consult periodically with the individual responsible for the medical staff

For a multi-hospital system, consultation with the chief of each hospital’s medical staff would be required

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340B Drug Discount Program

Covered Entities (Disproportionate share hospitals, children’s hospitals, critical access hospitals, and sole community hospitals) may receive drugs for outpatients at discount price

Covered Entities’ PBD may also participate in 340B Drug Discount Program if they satisfy certain conditions. HRSA requires that Covered Entity must include PBD on its Medicare cost report before PBD is eligible to participate*

CHOW acquired hospital’s off-campus PBDs*

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Hospital Services Supervision Requirements

Outpatient therapeutic services incident tophysician services*

Aid physician in treatment of patient

Must be performed in the hospital or in a PBD*

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Outpatient diagnostic tests

Examination or procedure to aid in assessment of a medical condition or identification of a disease

May be performed in the hospital, in a PBD, or in a non-hospital facility under arrangements

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Different supervision requirements for therapeutic services and some diagnostic tests

Only services excluded from supervision requirements are outpatient services that have their own statutory benefit and are not paid under the OPPS but rather under the MPFS, for example, outpatient diabetes self-management training services and lab tests

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Therapeutic Services Incident to Practitioner Services Supervision

Requirements Supervision may be performed by a physician

or by a certain nonphysician practitioner (clinical psychologist, licensed clinical social worker, physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse mid-wife)*

Services are furnished by or under arrangements by the hospital

Services are an integral although incidental part of practitioner’s services

Supervision Requirements Therapeutic Services

Services are performed in the hospital or in PBD*

Services are provided under the direct supervision (or other level of supervision as specified by CMS for the particular service) of a practitioner, subject to certain requirements

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Therapeutic Services Direct Supervision

Supervisory practitioner must be immediately available to furnish assistance and direction throughout the procedure*

Temporal requirement, no specific physical boundary requirement*

Supervisory practitioner cannot be so physically distant that he/she could not intervene right away

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Supervisory practitioner cannot be performing another procedure or service that he/she could not interrupt

Supervisory practitioner must have within his/her State scope of practice and hospital-granted privileges the knowledge, skills, ability, and privileges to perform the service*

Supervisory practitioner must be clinically able to furnish the service himself/herself

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Supervisory responsibility is more than the capacity to respond to an emergency and includes the ability to take over the performance of the procedure or provide additional orders

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Hospital should have in place credentialing procedures, bylaws and other policies to ensure that outpatient services furnished to beneficiaries are provided only by qualified practitioners

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Nonsurgical Extended Duration Therapeutic Services

Can last a significant period of time Have a substantial monitoring component that is

typically performed by auxiliary personnel Have a low risk of requiring practitioner’s

immediate availability after the initiation of the service

Are not surgical in nature

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Nonsurgical Extended Duration Therapeutic Services

Direct supervision is required during the “initiation” of the service, which may be followed by general supervision at the discretion of the supervisory practitioner

“Initiation” means the beginning portion of the service which ends when the patient is stable and the supervisory practitioner determines that the remainder of the service can be delivered safely under general supervision*

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Outpatient Diagnostic Tests Supervision Requirements

Outpatient diagnostic tests are furnished by or under arrangements by participating hospital

May be performed in or outside hospital* Tests are ordinarily furnished by or under

arrangements by a hospital for its outpatients for the purpose of diagnostic study

Tests would be covered as inpatient hospital services if furnished to an inpatient

Outpatient Diagnostic Test Supervision Requirements

Diagnostic tests furnished to hospital outpatients by an entity other than the hospital are subject to hospital unbundling rule

Particular diagnostic test must be performed under the appropriate level of supervision (general, direct, personal) as included in the quarterly updated MPFS Relative Value File*

Physician must perform supervision, even if NPP is authorized under State law to perform*

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Outpatient Diagnostic Tests

NPPs cannot provide required physician supervision when hospital staff perform tests*

When NPPs personally perform a diagnostic test, they must meet only the physician supervision requirements required under the Medicare coverage rules for that type of NPP*

For example, NP must simply work in collaboration with a physician; PA must practice under a physician’s general supervision

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Outpatient Diagnostic Tests

Outpatient diagnostic tests that require a physician’s direct supervision have the same immediately available, qualifications, and clinically appropriate/able conditions as outpatient therapeutic services*

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Outpatient Therapeutic Services and Diagnostic Tests Compliance

Tips

Review PBDs by location (on-campus, off-campus) and by type of service (therapeutic, diagnostic)

Review hospital operations Appropriately designated supervisory physicians

(diagnostic) and physician/NPPs (therapeutic) Hospital bylaws Supervision agreements Immediate availability

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Outpatient Therapeutic Services and Diagnostic Tests Compliance

Tips

How is supervisory practitioner contacted

Verify compliance with supervision requirements for diagnostic tests (general, direct or personal)

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Potential Consequences for Non-Compliance With Supervision

Requirements

Recoupment of overpayments*

Violation of Medicare Conditions of Participation for Hospitals*

Federal False Claims Act knowing retention of overpayments*

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Stark Law – Generally Implicated if a hospital or other entity

providing DHS has a direct or indirect financial relationship with a physician (or immediate family member) Vendor of under arrangements services is a

physician or physician group, is owned by a physician or physician group or has a compensation relationship with a physician

Physician is participant or has compensation relationship with a provider-based joint venture

Physician is owner or has compensation relationship with manager of provider-based facility

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Stark Law – Under Arrangements

Under arrangements analysis – 2009 IPPS Final Rule Person or entity that “has performed services that are

billed as DHS” is a DHS entity Services billed as hospital inpatient or outpatient

services considered DHS even if not otherwise DHS (e.g., cardiac catheterization); except lithotripsy

Person or entity that “has presented a claim to Medicare for the DHS” also continues to be a DHS entity

Effective October 1, 2009

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If physician has ownership or investment interest in under arrangements service provider –

Must meet an ownership exception under Stark Law if physician refers for the services that are provided under arrangements

Rural exception

Publicly traded securities

Physician may own if does not refer

Relationship with hospital must still meet exception for direct or indirect compensation relationship

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When does an entity “perform services”? CMS declined to define Example – if physician group does medical work

and could bill for services, it performs the service Example – entity that merely leases or sells space

or equipment, furnishes supplies that are not separately billable, or provides management, billing services or personnel does not perform the service

Court challenge - Council for Urological Interests v. Sebelius

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Stark Law – Per-Unit or Percentage Payment

Effective October 1, 2009 – Per-unit rental charges not permitted in space or equipment

lease if reflect services to patients referred by the lessor to the lessee

Rental payments may not be based on percentage of revenue raised, earned, billed, collected, or otherwise attributable to services performed or business generated in leased space or with leased equipment

Applies regardless of whether relationship is direct or indirect Parallel changes made to exceptions for space leases,

equipment leases, fair market value compensation arrangements, and indirect compensation arrangements

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Anti-Kickback Statute

Implicated in financial relationships with parties that also have referral relationship - whether or not physician Inability to set aggregate compensation in advance often

precludes use of personal services and equipment lease safe harbors

Guidance to consider – safe harbors, joint venture fraud alert, supplemental compliance guidance for hospitals, special advisory bulletin on contractual joint ventures, questions for consideration in submitting advisory opinion request, advisory opinions

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2010 Sleep Lab Services Advisory Opinions OIG Advisory Opinions 10-14, 10-23 and 10-24 All addressed under arrangements relationship

between hospital and sleep lab services company Company had no physician or hospital ownership Favorable opinions

10-14 – per unit fee, no marketing services 10-24 – fixed fee, full-time marketing services

Unfavorable opinion 10-23 – per unit fee, part-time marketing services

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Suspect characteristics in under arrangements transactions: Hospital pays above market rates to influence referrals.

Entity is in a position to influence referrals if it provides marketing services, has independent patient base, or is owned by referral sources.

Entity accepts below-market rates to secure referrals from hospital to entity, its owners or affiliates.

Hospital owns an interest in the entity so that investment returns may reward referrals. This also raises specter of undue influence in awarding contract.

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Referral source for hospital owns an interest in the entity. Even if services at fair market value, referral source could condition other referrals to hospital on award of contract.

Transaction includes furnishing items or services outside scope of under arrangements services, or furnishing items or services to patients who are not hospital patients.

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Safeguards Ordering and interpreting physicians have no financial

relationship Hospital payment to entity not conditioned on its

receipt of payment for tests Hospital assumes business risk and contributes

substantially – space, furnishings, medical director, administrative services

Opinions conditioned on compliance with Medicare under arrangements coverage and payment requirements

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Recent Developments

New CMS policy for practitioners ordering hospital outpatient services

Therapy caps extended to therapy services furnished in hospital outpatient departments*

Clarification of application of three-day window to nondiagnostic services*

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Recent Developments

Mission Regional Hospital Medical Center CMS RO denied provider-based status

attestation based in part on shared space* 340B drug discount program (off-campus PBDs;

significant expansion of program; disagreement as to proper use of 340B revenues; Congressional inquiries; audits; industry study)*

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Recent Developments

TJC accreditation of multi-campus hospitals –single governing body, unified medical staff and common nursing staff

CMS revision of Medicare CoP for hospital governing bodies to enable system with multiple hospitals and separate CCNs to have a single governing body

CMS proposed revision of Medicare CoP to require governing bodies to consult periodically with chief of medical staff

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Recent Developments

CMS clarifies in 2012 OPPS Rule that therapeutic services and supplies with own benefit category that are paid under OPPS are subject to same payment conditions as therapeutic incident to services*

CMS publishes proposed rule governing overpayments (false claims 60 days post-identification)

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Recent Developments

HHS OIG Work Plan for FY 2013 OIG continued review of physician coding for

professional services furnished in hospital outpatient departments

New initiative to review hospital-owned physician practices billing as provider-based to determine impact and extent to which CMS billing requirements are met*

New initiative to review impact of hospitals acquiring ASCs and converting them to outpatient departments

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Recent Developments MedPAC

March 2012 Report to Congress – Payment for E&M codes should be equalized in physician office and hospital outpatient department settings

Set OPPS rate to equal difference between nonfacility practice expense and facility practice expense in MPFS

October and November 2012 and March 2013 Meetings –Consideration of equalizing additional payments across physician and hospital settings

Frequently performed in physician offices

Similar unit of payment

Infrequently provided in emergency department setting

Minimal difference in patient severity across settings71

Future

Will advantages of provider-based status continue? (MedPAC; Grand Bargain; increasing negative publicity regarding facility fees)*

Benefits of affirmative provider-based determinations* Temporary treatment as provider-based

(reg/transmittal)*

Presumption that off-campus facility that furnishes services of the type ordinarily furnished in a physician’s office is freestanding*

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Future

Shared space arrangements

Time share arrangements

Definition of provider’s “main buildings” for determining on-campus or off-campus

Integrated medical staff

Joint venture outpatient departments

340B drug discount program

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provider-based status, under arrangements, and … (pbd) of the hospital to hospital patients ......

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