On May 3, 2019, the Centers for Medicare & Medicaid Services (CMS) issued draft guidance formalizing the agency’s policy on hospital co-location with other hospitals and healthcare entities. CMS’ new policy walks back its strict prohibition on hospital co-location, and allows hospitals more flexibility while maintaining protections for safety, privacy and quality of care.

For years, the hospital community has relied on informal guidance and subregulatory guidance that prohibited co-location of hospitals with other healthcare entities. CMS said the new guidance is intended to provide more clarity on these rules with the goal of “ensur[ing] safety and accountability without being overly prescriptive.”

Instead of prohibiting all co-location arrangements between a hospital and another healthcare entity, the new policy focuses on whether the shared space arrangement jeopardizes patients’ health, safety or rights to personal privacy and confidentiality. CMS stated that for a hospital to meet the hospital Conditions of Participation (CoPs), it must have defined and distinct clinical spaces designed for patient care, and cannot share those clinical spaces with another hospital or other healthcare entity. As an example, CMS said “co-mingling of patients in a clinical area such [as] a nursing unit, from two co-located entities, could pose a risk to the safety of a patient as the entities would have two different infection control plans.” CMS defined “clinical space” as “any non-public space in which patient care occurs.”

In contrast to its previous informal guidance, CMS now recognizes that hospitals and other healthcare entities may share certain “public spaces and public paths of travel,” such as “public lobbies, waiting rooms and reception areas (with separate ‘check-in’ areas and clear signage), public restrooms, staff lounges, elevators and main corridors through non-clinical areas, and main entrances to a building.” Both the hospital and the co-located healthcare entity would be responsible for compliance with the CoPs in these public spaces.

This change in policy provides hospitals and other healthcare entities with greater flexibility in designing shared space arrangements. For example, previous CMS informal guidance generally required that a hospital-based department in a medical office building be contained in a separate physical location (e.g., a separate suite number). Under CMS’ new draft guidance, a hospital could potentially share a suite and public waiting space with another healthcare entity (such as a physician office), so long as the clinical spaces for each entity were separate and distinct.

CMS’ draft guidance also confirms that a hospital may provide services — such as laboratory, dietary, pharmacy, maintenance, housekeeping and security services — under contract or arrangement with another co-located hospital or healthcare entity. Additionally, CMS clarified that while hospitals may obtain staffing services under arrangement from another entity, such staff “must be assigned to work solely for one hospital during a specific shift and cannot ‘float’ between the two hospitals during the same shift, work at one hospital while concurrently being ‘on-call’ at another, and may not be providing services simultaneously.” This staffing guidance likely also applies to hospitals co-located with non-hospital healthcare entities, such as physician offices.

CMS is accepting comments on its draft policy until July 2, 2019. Given that this policy is a change from past guidance, hospitals should carefully review it to determine how these proposed changes on shared space may affect current and planned projects. For more information on hospital co-location and CMS’ draft guidance, please contact one of the authors.