On May 3, 2019, the Centers for Medicare & Medicaid Services (CMS) released draft guidance for state survey agencies that would impact hospitals that share space, staff and/or services with another co-located hospital or health care entity. The draft guidance generally reaffirms the principles informally annunciated by various CMS employees in the past1  –inconsistently applied by accrediting organizations and state surveyors – which emphasized that certain payment rules, such as those for hospitals-within-hospitals, should not supersede the requirement that each co-located hospital must independently satisfy Medicare hospital conditions of participation.

The release, when finalized, will provide more authoritative guidance concerning hospital co-location arrangements, and presumably result in greater consistency. However, if finalized in its current form, it will also limit the flexibility of hospitals to structure arrangements for shared space, staff and services. CMS is seeking comments on the draft guidance until July 2, 2019. Hospitals and their co-located health care entities that are concerned about the restrictive guidance may wish to provide comments by that date.

Summary of Draft Guidance

As an initial matter, CMS notes that co-location of hospitals with other health care entities has been prohibited by subregulatory guidance, and that CMS now seeks to clarify through the draft guidance how state surveyors should evaluate such arrangements for compliance with the Medicare hospital conditions of participation (COPs) “without being overly prescriptive.” CMS clarifies in the draft guidance that the co-location of all or part of a hospital is permitted, while still noting that each hospital must demonstrate separate and independent compliance with the Medicare hospital COPs as described further below.

Distinct Space and Shared Space

Citing concerns over patient privacy and infection control, the draft guidance instructs surveyors to view a hospital’s clinical spaces designated for patient care as “distinct” space that cannot be shared with another provider. Thus, the draft guidance would preclude block leasing of a hospital’s clinical space. Further, patients, staff and other individuals would not be permitted to access a co-located entity by traveling through the clinical space of another hospital or entity, including, for example, a hallway or corridor through an inpatient nursing unit or hospital emergency department. In contrast, two hospitals or providers/suppliers can utilize shared public spaces so long as both entities are individually responsible for compliance with the COPs in those spaces. CMS provides examples of permissible “shared space,” including:

  • Public lobbies, waiting rooms, or reception areas (so long as there are separate patient “check-in” areas and clear signage regarding the responsible provider);
  • Public restrooms;
  • Staff lounges;
  • Elevators;
  • Main building entrances; and
  • Public corridors and paths of travel, such as a main hospital corridor with distinct entrances for each department.

The guidance proposes that surveyors request floor plans that clearly identify which hospital(s) use what space within the physical plant. To the extent both providers use a shared space, both providers will receive statements of deficiency for any non-compliance of such shared space. This requirement may subject a hospital to possible survey citations outside of a normal survey cycle for the hospital’s state license or CMS re-certification.

Shared Staff Arrangements

The draft guidance affirms and elaborates on the past informally-articulated views of CMS officials regarding shared services. First, the guidance acknowledges that it is permissible for a hospital to obtain food preparation and delivery services, in addition to common utilities (e.g., medical gasses, fire detection and suppression) from the entity with which it is co-located. Second, the guidance reaffirms that staff may be provided “under arrangements” and be employed by both hospitals – so long as the staff are providing services for only one hospital at a time. The draft emphasizes that it is not permissible for staff to “float” between two hospitals during the same shift, or to be on call for both hospitals at the same time, which may impact code service staffing by hospitals-within-hospitals. Similar to the earlier presentations by CMS officials, the draft guidance focuses more heavily on the use of shared nursing staff particularly as a potential problem area for surveyors of co-located hospitals. 

The draft guidance takes a different approach to non-contracted personnel, such as physicians who may provide services at both hospitals or at the hospital and another health care entity. Specifically, the guidance indicates that medical staff approved by both governing bodies, and appropriately credentialed and privileged by each hospital, may “float” between the co-located hospitals. This proposal should allow hospitals to continue to rely on physicians on their medical staff for call coverage even if such physicians also provide services at a co-located hospital or other provider/supplier entity, such as an independent diagnostic testing facility (“IDTF”).

CMS instructs surveyors to ask hospital leadership for a list of all services that the hospital has contracted to use from another co-located entity to know what services may need to be considered as part of a co-location survey. Surveyors must then survey the physical location where the contracted services are provided, unless that location is off-site, in order to assess whether the service has appropriate oversight by the hospital’s governing body and Quality Assurance and Performance Improvement program. CMS also proposes requiring surveyors to review staff schedules and personnel files to ensure any staff are available immediately to perform required services at a hospital and have received appropriate training from the contracting hospital.

Emergency Services

Hospitals without emergency departments, such as hospitals-within-hospitals and inpatient rehabilitation facilities, must still have appropriate procedures in place to address patients’ emergency care needs 24 hours per day, 7 days per week. The draft guidance explains that these procedures must include, at a minimum: identifying when a patient is in distress; how to initiate an emergency response (e.g., calling for staff or the on-call physician); how to initiate treatment (e.g., CPR and the use of an AED); and recognizing when a patient needs to be transferred to another facility for treatment. These policies must be tailored to the types of scenarios typical of a hospital’s patient population.

CMS proposes permitting a hospital to contract for emergency services, so long as the contracted staff is not working at another health care provider simultaneously while being on call for the hospital’s emergency services. However, a hospital would not be permitted to contract with its co-located hospital to provide the initial emergency response and treatment for the hospital’s patients. The guidance does acknowledge that transfer from a co-located hospital, such as an inpatient rehabilitation hospital, to its host hospital may be appropriate for continuation of care beyond the initial emergency treatment, which CMS defines as CPR and the use of an AED. Surveyors therefore are instructed to evaluate the following emergency care services for independent compliance:

Whether the hospital responds to its own emergencies with its own trained staff (not another entity’s staff);

  • Whether the hospital has proper emergency equipment for resuscitation, such as an AED, code cart, intubation tray, and necessary medications;
  • Whether the hospital’s emergency equipment is properly maintained; and
  • Whether the hospital’s staff are trained on the appraisal of emergencies, the use of emergency equipment, initial treatment, and referral when appropriate.

Of note, the guidance proposes that CMS treat hospitals without emergency departments that contract with another hospital’s emergency department for emergencies as “provid[ing] emergency services” and therefore subject to EMTALA requirements. Surveyors are instructed to verify that such hospitals meet EMTALA requirements, and that any staff provided by contract for those services are available at all times and committed to that hospital during the times they are contracted for emergency services.


The new guidance provided by CMS may help hospitals that share space or services with another health care provider to navigate compliance with the Medicare COPs. While the draft guidance is being finalized, some possible compliance guideposts for co-located hospitals to consider follow:

  • Clinical space, such as operating rooms, outpatient services departments, or hallways through an inpatient nursing unit, should not be shared with another health care provider.
  • Maintain floor plans with clear identification of which provider(s) use what space(s) within a physical plant.
  • Staff may provide services under contract to more than one health care entity, so long as they provide services to only one entity during a shift or set time block.
  • Keep staff schedules that reflect appropriate, dedicated staffing on a 24 hour, 7 days per week basis, as well as personnel files demonstrating each staff member has received hospital-specific training.
  • Ensure the hospital can provide initial emergency assessment, treatment, and transfer if warranted, for its patients. The hospital should use staff trained to provide those services who are not provided on an “on-demand” basis from a co-located health care provider where they simultaneously provide services.
  • Physicians and other members of the medical staff appropriately credentialed and privileged by each hospital may “float” between the hospital and another hospital or other health care entity to provide patient care services.

As noted above, CMS is soliciting comments on the proposed draft guidance until July 2, 2019. Hospitals seeking more flexibility should consider providing comments on the draft guidance. We will continue to monitor developments related to the finalization of this guidance.