OIG Recommends Eliminating Provider-Based Designation for Facilities Owned by Hospitals

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In a report released on June 17, 2016, OIG renewed its call for CMS to either eliminate the provider-based designation, which allows facilities owned by and integrated with a hospital to bill Medicare as a hospital outpatient department, or to “equalize payment for the same physician services provided in different settings.”  The report details OIG’s findings in connection with a review of 272 hospitals that responded to an OIG request for information on provider-based facilities.  Among other things, OIG found that 39 of the 50 hospitals in its sample that had not voluntarily attested for all of their provider-based facilities owned off-campus facilities that did not meet at least one provider-based requirement.  OIG made several recommendations to CMS, including that CMS (1) implement systems and methods to monitor billing by all provider-based facilities, including unique identification numbers that would enable CMS to determine which services are furnish in on-campus provider-based facilities (as distinguished from hospital outpatient departments that are within the four corners of the provider);  (2) require hospitals to submit attestations for all their provider-based facilities;  (3) ensure that regional offices and MACs apply provider-based requirements appropriately and consistently when conducting attestation reviews, and (4) take appropriate action against hospitals and their off-campus provider-based facilities that OIG identified as not meeting provider-based billing requirements.

CMS agreed that it should work to ensure that regional offices were applying the provider-based requirements uniformly and consistently, and it also agreed that it should increase the instances in which it is taking appropriate action against provider-based facilities that are not meeting the provider-based requirements. 

However, CMS disagreed with  OIG’s recommendation that it adopt a unique coding system in order to identify services that are provided at on-campus facilities, stating that its primary policy concerns were for off-campus facilities. Specifically, CMS is concerned about hospitals acquiring physicians’ offices that are off-campus and making such offices into provider-based departments and billing under OPPS even though “nothing has changed about the services being furnished.”  CMS stated in its comments that it does not have the same policy concerns about on-campus facilities. 

Finally, CMS disagreed with OIG’s recommendation that all hospitals be required to submit provider-based attestations for all of their provider-based facilities.  CMS stated in its comments to OIG that the changes required by section 603 of the Bipartisan Budget Act of 2015, which prevents new off-campus provider-based departments from being paid under the outpatient prospective payment system after December 31, 2016, may limit the vulnerabilities associated with provider-based billing.  CMS stated that it would consider other activities after the changes required by section 603 are implemented.  

A copy of OIG’s report is available here

Reporter, Ramsey Prather, Atlanta, + 1 404 572 4624, rprather@kslaw.com.

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