On November 1, 2016, the Centers for Medicare & Medicaid Services (CMS) issued the 2017 Medicare Outpatient Prospective Payment System (OPPS) Final Rule. One aspect of this rule is the implementation of payment decreases for certain off-campus provider-based departments (PBDs) required by Section 603 of the Bipartisan Budget Act of 2015. OPPS payments will end on January 1, 2017 for items and services furnished in off-campus PBDs that did not furnish provider-based items and services prior to November 2, 2015. Dedicated emergency departments and on-campus PBDs are not affected by Section 603 and will continue to receive OPPS payments.

Key questions regarding Section 603 answered by the Final Rule are:

  • Excepted and Nonexcepted Off-Campus PBDs. CMS has adopted the terminology "excepted" and "nonexcepted" to describe the effect of Section 603 on off-campus PBDs.
    • Excepted off-campus PBDs are those locations that may continue to receive OPPS payments because they furnished provider-based items and services prior to November 2, 2015. Hospitals must maintain documentation sufficient to prove their off-campus PBDs are excepted.
    • Nonexcepted off-campus PBDs are those locations that did not furnish provider-based items or services prior to November 2, 2015, and therefore will be paid under the new Medicare Physician Fee Schedule (MPFS) rates. CMS declined to create an exception for off-campus PBDs that were mid-build or under development on November 2, 2015.
  • Relocation. Excepted off-campus PBDs will lose their status if they relocate from the physical address and suite number listed on their provider enrollment form as of November 2, 2015. Exceptions to this rule may be granted on a case-by-case basis by CMS Regional Offices in extraordinary circumstances outside the hospital's control that necessitate temporary or permanent relocation. Examples of such circumstances include significant public health and safety issues, natural disasters, or seismic building code requirements. Additionally, the relocation of a PBD that was on-campus as of November 2, 2015 to an off-campus location will result in the PBD no longer being paid under the OPPS.
  • Expansion of Services. CMS retracted its initial proposal of limiting OPPS payments for excepted off-campus PBDs to items and services in the same clinical family as items and services furnished prior to November 2, 2015. An excepted off-campus PBD will receive OPPS payments for all eligible billed items and services regardless of whether it furnished such items or services prior to November 2, 2015. CMS intends to monitor service line growth in excepted off-campus PBDs and may propose limitations on service line expansion as necessary.
  • Change in Ownership. Excepted off-campus PBDs will lose their status in the event of a sale unless the sale also includes the main provider, and the new owner accepts the main provider’s Medicare provider agreement. An excepted off-campus PBD cannot be transferred from one hospital to another and maintain excepted status.
  • Payment Mechanisms and Rates for Nonexcepted Items and Services. CMS adopted a new subset of payment rates within the MPFS, generally set at 50 percent of the OPPS rates, for non-excepted PBD services for calendar year 2017. CMS also added additional billing requirements for such services. CMS will review claims data for non-excepted PBD services and anticipates gradual adjustments in the rates for such services over the next few years to match the technical or practice expense payments made to physicians in non-facility settings.

The primary take-away from the Final Rule is that hospitals and health care providers with excepted off-campus PBDs may expand the services offered at those locations, but may lose excepted status if the off-campus PBD is relocated or sold, other than as part of a sale that includes the main provider. Hospitals and other health care providers with nonexcepted off-campus PBDs will need to be aware of new payment rates and billing requirements for such items or services.