Murtha Means More

The OIG is Interested in Provider-Based Status of Hospital Sites of Service

December 13, 2012

At a recent meeting at the Connecticut Hospital Association, representatives of CMS Boston and National Government Services mentioned renewed CMS interest in whether hospital sites that bill as provider-based really qualify.   Hospitals don’t have to attest to and receive confirmation from CMS that a location meets the provider-based criteria – it can just bill Medicare under the Hospital Outpatient Prospective Payment System (HOPPS) and hope it’s right.  According to one of the speakers, some at CMS have floated the idea that attestation should be mandatory.   The Office of the Inspector General (OIG) 2013 Work Plan, the annual roadmap of OIG plans for scrutiny and eventual enforcement, announced its intention to review physician billing that reports the site of service as provider-based.

Provider-based physician services are reimbursed under HOPPS rather than the Physician Fee Schedule. HOPPS builds in a higher component for hospital overhead than it does for services in a community physician’s office. As a result, Medicare reimbursement for the same physician service is usually higher under HOPPS.  The OIG is interested because of a marked increase in the number of physician office visits in provider-based sites.  This is not surprising given the steady growth in the number of physicians who are now employed by hospitals or their affiliates.  In 2011, MedPAC, the advisory group that recommends Medicare payment changes, suggested that the HOPPS E/M code reimbursement in non-emergency settings be reduced to match the physician office rates.  However, the OIG Work Plan put a spin on the MedPAC recommendation, saying there was concern “about the financial incentives presented by provider-based status.”

If the OIG thinks hospitals are inaccurately characterizing their outpatient sites as provider-based, this would be a good time to review your outpatient locations.  The provider-based rules impose specific requirements on both on-campus and off-campus sites, but off-campus sites have to meet additional criteria and are most likely to be out of compliance.  In order to be provider-based and bill under HOPPS, the hospital must have the same degree of oversight, control, and integration at an off-campus site as if it were an on-campus hospital department. There are certain services that don’t get characterized as provider-based because their status makes no difference to the reimbursement or the beneficiary’s out of pocket costs:  ASCs, CORFs, home health agencies, hospices, SNFs, inpatient rehabilitation units (IRFs), IDTFs, ESRD facilities, or sites performing administrative services only. Sites that provide outpatient PT/OT/SLP are worth a special look, because provider-based (hospital outpatient) therapy has generally been exempted from the Medicare therapy caps. (Therapy caps have been a moving target and remain unsettled for the future.)

Check that all other outpatient sites that bill under HOPPS can meet the core requirements for provider-based status:

  1. Unless prohibited by state law, the site operates under the same license as the hospital to which it is provider-based;
  2. The clinical services are fully integrated with those of the hospital, with common privileges, quality assurance and monitoring as for any other hospital department;
  3. The financial operations of the site are fully integrated within the financial system of the main provider and costs are reported in the main provider’s cost centers;
  4. The location or facility is held out – by signage and otherwise – to the public and payers as part of the main provider; and
  5. Comply with EMTALA and billing rules applicable to hospital outpatient departments.

Additional requirements apply to off-campus sites, some of which constrain the use of leased employees, management contracts, and services provided under arrangements.  The provider-based rules are very complex, and many hospital off-campus sites may not have had their compliance with the rules reviewed for years.  Hospitals that have been buying physician practices or employing former community-based physicians sometimes leave the offices where and how they found them, and may have failed to bring them into sufficient integration with the hospital to satisfy the provider-based criteria. Since provider-based outpatient hospital billing seems to be attracting OIG attention right now, please do not hesitate to contact your usual Murtha Cullina attorney or Elizabeth Neuwirth (203.772.7742 / if you’d like to review your hospital’s compliance with the billing rules

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