On July 6, 2016, the Centers for Medicare & Medicaid Services ("CMS") released the 2017 Outpatient Prospective Payment System ("OPPS") Proposed Rule (the "Proposed Rule"). The Proposed Rule explains how CMS plans to implement Section 603 of the Bipartisan Budget Act of 2015 ("Section 603"), which established a new site neutral payment policy for certain off-campus hospital outpatient departments.

Section 603 provides that, as of January 1, 2017, certain items and services provided by off-campus hospital outpatient departments will no longer be reimbursed under the more favorable OPPS, and will instead be paid under another "applicable payment system."

Excepted Items and Services

CMS proposes to clarify which items and services are excepted from the new site neutral payment system. Such excepted items and services include:

  • items and services furnished in a dedicated emergency department;
  • items and services that were furnished and billed by an off-campus provider-based department ("PBD") prior to November 2, 2015; and
  • items and services furnished in a hospital department within 250 yards of a remote location of the hospital.

CMS further proposes the following clarifications regarding how certain changes would affect the excepted status of items and services that were billed by an off-campus PBD prior to November 2, 2015:

  1. Relocation
    The Proposed Rule provides that relocation of an existing PBD will cause the PBD to lose its excepted status. CMS notes its concern that if it allows existing PBDs to relocate, hospitals would relocate existing PBDs to larger facilities in order to expand their services and acquire additional physician practices. CMS recognizes that "there may be circumstances beyond the hospital’s control where an excepted off-campus PBD must move from the location in which it existed prior to November 2, 2015." As examples of such circumstances, CMS mentions only natural disasters and changes in Federal or State requirements. CMS does not list any other circumstances that are beyond a hospital's control. For example, under the Proposed Rule, it appears that relocation would cause a PBD to lose its excepted status, even if the hospital relocated the PBD due to a sudden increase in rental fees at its previous location.

    CMS is soliciting comments regarding whether it should establish a relocation exception process similar to the exception process under the Hospital Value-Based Purchasing program. Additionally, CMS is soliciting comments regarding whether it should consider exceptions for any other circumstances that are beyond the control of the hospital.
  2. Change of Ownership
    CMS proposes to clarify that, if a hospital undergoes a change of ownership ("CHOW"), the CHOW will not cause the PBD to lose its excepted provider-based status if the new owner accepts the existing Medicare provider agreement. However, an individual off-campus PBD cannot be transferred from one hospital to another and maintain its excepted status.
  3. Service Expansion
    CMS proposes that any additional items and services beyond those within the same "clinical family" of services furnished and billed prior to November 2, 2015 will not be excepted services. Thus, even an excepted off-campus PBD that was billing under the OPPS prior to November 2, 2015 may not expand into new services that are outside of its existing clinical families of services.

Applicable Payment System

Section 603 provides that non-excepted items and services that are furnished in an off-campus outpatient department will be reimbursed under an "applicable payment system." CMS notes that it will not be able to set up a new payment system by January 1, 2017 to pay the off-campus PBD for non-excepted items and services. Thus, CMS proposes a one-year transitional rule under which the Medicare Physician Fee Schedule (MPFS) will be the “applicable payment system” for the majority of these non-excepted items and services until 2018.

Under this one-year transitional rule, PBDs providing non-excepted services have two options: (1) the physician that provides the non-excepted services would bill the services at the non-facility MPFS rate, and the hospital would need to have a contract in place with the physician to receive its portion of the payment; or (2) the PBD would need to re-enroll as another provider type that is reimbursed under the MPFS (such as an ambulatory surgical center or a group practice).

CMS will accept comments on the Proposed Rule until September 6, 2016.