Many hospitals may have to reassess their plans to develop new off-campus hospital outpatient departments (HOPDs). The Bipartisan Budget Act of 2015 (the Act), signed into law by President Obama on November 2, changes the compensation available for off-campus HOPDs established on or after such date, which will likely result in reduced Medicare payments for non-emergency services performed at these HOPDs.

Specifically, Section 603 of the Act provides that, starting January 1, 2017, off-campus HOPDs established on or after November 2, 2015 will no longer be eligible for payment under the Outpatient Prospective Payment System for non-emergency services. Instead, non-emergency services performed at these facilities will be paid under the Ambulatory Surgical Center Payment System or the Physician Fee Schedule. Notably, while HOPDs that currently bill under the OPPS are “grandfathered” for purposes of these provisions, HOPDs that are currently under development, but not yet billing under the OPPS, will not be protected from the change in reimbursement.

Section 603 only affects compensation paid to HOPDs considered to be “off-campus” with respect to a hospital. An HOPD is considered to be “off-campus” if it is located more than 250 yards from a main provider hospital or a remote location of a hospital. HOPDs within the 250-yard range are not affected. Additionally, because compensation for emergency department services (identified by HCPCS codes 99281-99285) will remain unchanged, off-campus facilities operating as dedicated emergency departments will also likely be unaffected. Section 603 also provides that administrative and judicial review are unavailable for determinations relating to applicable payment systems or determinations whether a provider department is considered an off-campus HOPD.

The reimbursement changes implemented under Section 603 will likely have a significant impact on the financial performance of many HOPDs. While the reimbursement changes are expected to reduce overall Medicare spending, the changes may also discourage hospitals from developing new outpatient facilities in areas where they may be needed. Hospitals which are considering developing off-campus HOPDs (as well as those in the process of developing such facilities) will likely need to reassess the viability of such projects in light of the financial impact.