After more than two years of anticipation, the Centers for Medicare & Medicaid Services (“CMS”) issued final guidance pertaining to hospital co-location with other hospitals or health care facilities for purposes of compliance with the Medicare Conditions of Participation (“CoPs”) for Hospitals subject to 42 CFR Part 482 (“Final Guidance”).

The original CMS guidance was issued in draft form on May 3, 2019 (“Draft Guidance”), and is outlined in a previous Hall Render article. The CMS Final Guidance was issued on November 12, 2021, is effective immediately, and appears to provide some flexibility for co-location in some instances but several questions remain unanswered. As further described below, the Final Guidance removes some of the prescriptive requirements from the Draft Guidance and instead points to other CoPs to establish standards, which may allow for more flexibility depending on how surveyors interpret and apply this guidance. The Final Guidance will be included in Appendix A of the CMS State Operations Manual as a component of the hospital survey process.


In the Final Guidance, CMS allows hospitals to be co-located with other “health care providers” as long as the hospital remains in compliance with the CoPs and at all times meets the definition of a hospital at Section 1861(e) of the Social Security Act. CMS states that patient rights, infection control, governing body and physical environment are specific CoP requirements to consider when sharing space with another health care provider.

Surveyors are instructed to identity any space being shared with another entity. Any noncompliance in the shared space could be cited for the hospital under survey and could also trigger a complaint in the co-located facility as well. CMS states that “Surveyors are not expected to be evaluating spaces for co‑location, but rather determining if the hospital being surveyed is in compliance with the hospital CoPs, independent of its co-located provider.” Nevertheless, if a surveyor identifies a CoP issue impacting the co-located health care provider, CMS may be able to conduct a complaint survey of the co-located health care provider while still on site.

The Draft Guidance described “distinct space” and “shared space” and proposed to allow hospitals to share “public spaces,” such as lobbies and waiting rooms, and “public paths of travel,” such as main hospital corridors, while requiring clinical spaces to be separate. The Final Guidance removes all references to these definitions and examples and simply requires the hospital and co-located health care provider to maintain compliance with CoPs at all times.

It is worth noting that CMS excludes private physician offices and CAHs from the reference to “health care providers” subject to the Final Guidance. Thus, there remain unanswered questions regarding CoP survey compliance at hospital locations co-located with physician offices. Further, the flexibility in the Draft Guidance to share lobbies, waiting rooms, and reception desks may have been helpful to hospitals for space use considerations for purposes of compliance with the Medicare provider-based rule, assuming CMS would apply the standards consistently across the regulatory framework. With all reference to “shared spaces,” “public spaces” and “public paths of travel” removed from the Final Guidance, hospitals are left with no formal guidance related to CMS’ interpretation of co-location for purposes of the provider‑based rule compliance.

Contracted Services, Staffing and Emergency Services

In the Final Guidance, CMS states that laboratory, dietary, pharmacy, maintenance, housekeeping, security services, delivery services and utilities are examples of services that may be contracted or provided under an arrangement in a co-located hospital. Surveyors are instructed to treat these contracted services just as any other hospital that has contracted services.

CMS removed references from the Draft Guidance that required hospitals to “independently” meet staffing CoPs and deleted the restriction on hospital staff “floating” between the hospital and another entity. The Final Guidance states that staffing arrangements with facilities that are co-located with a hospital are allowed so long as the hospital’s staff meet the needs of the patient for whom they are providing care, meet statutory and regulatory requirements for the specific activities the staff is providing, and receive appropriate training and education on hospital policies and procedures. This change likely allows more flexible staffing arrangements between co-located hospitals and other health care providers.

CMS expects hospitals without emergency departments to comply with the emergency services obligations of the CoPs applicable to hospitals without an emergency department. CMS recognizes that appropriate transfers or referrals to co-located acute care hospitals may be necessary after the initial emergency treatment of the patient.

Practical Takeaways

  • CMS Surveyors are able to use this Final Guidance effective immediately. Hospitals that currently have co-located space, shared staff or contracted services with another health care provider should review compliance with this Final Guidance as well as CoPs as soon as possible to anticipate and address potential survey issues.
  • The Final Guidance does not include certain comments and requirements found in the Draft Guidance; nearly four pages of language and content has been removed. However, CMS continues to reinforce CoP compliance, specifically patient safety, patient privacy and infection control in shared space. In some areas, the removal of several pages of details may provide more flexibility for hospitals that have co-located space. It remains to be seen how surveyors will interpret this Final Guidance.
  • The Final Guidance does not address co-location arrangements with CAHs or physician offices, including physician timeshare or lease arrangements. It is unclear what rules and standards CMS will apply to those arrangements.
  • The Final Guidance only addresses co-location as it pertains to the CoPs. However, many co‑location enforcement actions in the past were brought based on purported violations of the provider-based regulation at 42 C.F.R. § 413.65. It is unclear whether CMS will apply these flexible standards to reviews under the provider-based rules.