There are two sections of the Federal Register entry of the 2017 Outpatient Prospective Payment System final rule that address the implementation of Section 603 of the Bipartisan Budget Act (BiBA) of 2015. This involves congressionally mandated payment changes for off-campus, provider-based clinics and operations. Interestingly enough, the provider-based rule (PBR) found at 42 CFR §413.65 is not materially changed.

The two sections appear in Section X, Nonrecurring Policy Changes:

  • Section X. A. – Implementation of Section 603 – This is a final rule, and
  • Section X.B. – Payment Rates for Nonexcepted Items/Services – This is an interim final rule.

The fact that the second section is an interim final rules simply means that we have 60 days to comment, with comments due by Dec. 31, 2016. Of course, this is tantamount to meaningless, because this rule goes into effect on Jan. 1, 2017. CMS has to give us a comment period because something completely new is being proposed to be implemented.

As far as the many questions surrounding implementation of Section 603, CMS has softened its approach only a little. The letters from Congress that were sent on Oct. 6 are not mentioned by CMS in this Federal Register entry, nor do the directives of Congress in these letters followed to any great extent.

Here is a brief synopsis, with key points highlighted:

  • Definition of New Provider-Based Clinics/Operations – The basic issue here is that of identifying off-campus clinics that were in existence on or before Nov. 2, 2015. CMS had proposed a single criterion of billing for determining if a clinic was already established and should thus be grandfathered for payment purposes (i.e., recognized for both OPPS and Medicare Physician Fee Schedule payment). CMS did slightly soften its stance to include off-campus, provider-based clinics or operations that were providing services but had not yet filed claims for any services by the deadline.
  • Relocation of Off-Campus Clinics/Operations – CMS is adamant that any changes in buildings, addresses, and/or other relocations will obviate the grandfathering. A very limited exception is made for natural disasters, seismic building code requirements, or significant public health and public safety issues.
  • Mid-Build Situations – Given that Section 603 came as a surprise to hospitals, there were situations in which a hospital was working to establish off-campus provider-based clinics, but were not yet providing services. For these situations, CMS is steadfast in that they will not be grandfathered.
  • Additional Services – Two questions arise in this area. First, there is the issue of providing new, additional services, and second, there is providing an increased volume of services (e.g., adding new practitioners). CMS had proposed the development of series of clinical families of services to determine which services were being provided before the Nov. 2 deadline. CMS has decided to drop this issue of increased scope of services and possible increased volume of services. CMS has indicated that it will monitor this situation for possible abuses.
  • Change of Ownership – CMS is implementing its proposal that grandfathering is maintained only if the new owner accepts the provider agreement. Thus, there is no change relative to what was proposed.

Overall, CMS is still taking a very restrictive approach to implementation of Section 603. With the exception of dropping the additional services issue, only a little softening of the agency’s approach has occurred.

The second section in the Federal Register addresses how CMS plans to pay new off-campus, provider-based clinics. The basic idea is that these new operations should be paid at the full MPFS rate, that is, the non-facility rate. There would be no facility payment under OPPS, that is, through ambulatory payment classifications (APCs).  CMS argues that payment of the Medicare Physician Fee Schedule (MPFS) amount through institutional claims is virtually impossible. In the proposed rule, CMS suggested that perhaps the physicians and practitioners should be paid through professional claims, and then the hospitals and physicians could negotiate some sort of arrangement. This assertion concerning institutional claims is a little disconcerting because CMS is already paying for physician services on institutional claims through Method II billing for CAHs (critical access hospitals).

What CMS is proposing to do is completely different from any previous discussions. The proposed payment scheme is to pay at 50 percent of the APC payment! This is certainly a simple approach that can utilize institutional claims. However, this approach raises many questions.

The model development and statistical analysis for this approach, as presented in the Federal Register, is less than robust. Note that ASCs (ambulatory surgical centers) generally receive about 55 percent of the APC payment. How this 50 percent relates to the equivalent MPFS non-facility payment will need thorough statistical analysis. In order to identify the services that will be paid at 50 percent, a new modifier, the PN modifier, will be required on the institutional claims.

Given the timing of this whole process, hospitals should anticipate that the 50-percent payment rate will be implemented even though there may be many comments, objections, and suggestions relative to this approach. What will happen in the future is anyone’s guess.

Stand by, everyone!

EDITOR’S NOTE: To learn more about provider-based clinics, register to attend Provider-based Clinics: In the Eye of the Storm,” Dec. 7, 1:30 p.m. ET, featuring Duane Abbey, PhD.

About the Author

Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.

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