Hospitals with off-campus provider-based departments (“PBDs”) under construction (or “mid-build”) at the time of the Bipartisan Budget Act of 2015 – which limited Medicare payment to off-campus provider-based departments that were not operational prior to November 2, 2015– have been waiting years for Medicare to confirm the provider-based status of these locations. With mid-build audits underway, it appears hospitals are one step closer to that goal.

Under the “mid-build” exception, an off-campus PBD is exempt from the Medicare payment limitation if the main provider (1) had a binding written agreement with an “outside unrelated party for the actual construction” of the PBD before November 2, 2015; and (2) submitted a written certification of its mid-build status, signed by its Chief Executive Officer or Chief Operating Officer, to the Medicare Administrative Contractor by February 13, 2017. By statute, CMS must audit compliance with the mid-build requirement by no later than December 31, 2018.

Those audits have begun to move forward; as the first line of business, Medicare contractors are requesting a copy of the binding written agreement for the off-campus PBDs of interest. While this may be straightforward in some instances (e.g., a single construction contract), in others it may require multiple contracts and additional explanation (e.g., leased hospital space built-out to PBD specifications). The extent to which contractors will entertain back-and-forth dialogue during these audits is unclear, but given the lack of appeal rights afforded to mid-build applicants, it is important for hospitals to respond promptly and thoroughly.