Provider-Based Status, Under Arrangements, … (PBD) of the hospital to ... Mixed occupancy classifications ... Match between Joint Commission accreditation and hospital CCN

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By

Thomas E. Dowdell* Catherine T. Dunlay*Fulbright & Jaworski L.L.P. Taft Stettinius & Hollister LLPTelephone:(202) 662-4503 Telephone: (614) 220-0236Email: [email protected] Email: [email protected]

*This presentation is for informational purposes only and does not constitute legal advice.

AMERICAN HEALTH LAWYERS ASSOCIATION

Institute on Medicare and Medicaid Payment Issues

Provider-Based Status, Under Arrangements, Enrollment and Related Medicare

Requirements

March 28-30, 2012Baltimore, MD

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Overview Provider-based status, under arrangements,

enrollment/CHOW, 340B drug discount program, practitioner supervision, anti-fraud and abuse, and other federal requirements that can apply to hospital outpatient services

Outpatient provider-based services and outpatient under arrangements services

Provider-based status principle and requirements

Under arrangements principle and requirements

Enrollment/Change of Ownership (CHOW) issues Medicare outpatient services supervision requirements Anti-Kickback Statute and Stark Law Recent developments

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Types of Hospital Services

Services furnished in a provider-based department (PBD) of the hospital to hospital patients

Services furnished “under arrangements” in a PBD or outside the hospital to hospital patients

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Compare Provider-Based Services to Hospital Under Arrangements Services

Provider-based services are furnished in a PBD that complies with the applicable provider-based status requirements Provider-based regulatory requirements first

effective in 2000 (previously included in a Medicare manual and thereafter in a Program Memorandum)

Requirements apply to a facility/location, not a specific service

Apply for Medicare and Medicaid payment purposes

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Compare Provider-Based Services to Hospital Under Arrangements Services

Hospital under arrangements services may be furnished within the hospital or outside the hospital Under arrangements coverage permitted under

the Medicare statute since 1966 Payment to the hospital for the service

discharges the patient’s liability Conditions apply to services, not a

facility/location

Significance of Provider-Based Status

Medicare Conditions of Participation (S&C-12-17-Hospitals (Feb. 17, 2012) CMS promulgated a new policy for practitioners ordering hospital outpatient services)*

Payment amounts (limitations now apply to outpatient department therapy services)**

Coverage

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Significance of Provider-Based Status

Commercial payers

Medicare billing (two bills/one bill)

Hospital outpatient unbundling rule

Physician incident to services

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What Is Provider-Based Status?

General Rule – Requirements apply to a facility if its status as provider-based or freestanding affects Medicare payment amounts and/or beneficiary liability for services furnished in the facility “On campus”-within 250 yards of hospital’s main

buildings* Location of facility on-campus or off-campus of

hospital does not determine whether requirements apply to facility; if facility is subject to requirements, location determines which requirements apply

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Provider-Based Requirements –Specifically (42 C.F.R. §413.65)

On-campus and off-campus facilities

Licensure – Main provider and facility are operated under the same license (except if the State requires separate licensure or prohibits common licensure)

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Specific Requirements

Clinical Services

Professional staff of the facility have clinical privileges at the main provider (hospital and remote location – no differentiation in privileges permitted)*

Exclusive physician contracts?**

Medical staff committees at the main provider are responsible for medical activities in the facility

Medical records are integrated

Inpatient and outpatient services are integrated

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Financial integration – financial operations of the facility are fully integrated within the financial system of the main provider

Public aware of hospital-facility relationship (system awareness insufficient) Signage is a critical factor

Shared space arrangements (July 2011 Chicago RO negative determination)*

Provider-based obligations, including EMTALA

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Additional requirements that apply only to off-campus facilities Operation under the ownership and control of the

main provider Provider solely owns facility* Common governing body Common organizational documents Main provider has final responsibility for

administrative decisions

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Administration and supervision

Facility is under direct supervision of the main provider

Same monitoring and oversight

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Location

35-mile radius

75/75 patient population tests

75% of facility’s patients reside in same zip code areas as 75% of main provider’s patients

75% of facility’s patients who require inpatient care received such care from main provider

Rural children’s hospital neonatal intensive care unit

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Provider-Based Obligations

EMTALA

Physician services must be billed with the correct site of service indicator (POS 22)*

Hospital outpatient departments must treat all Medicare patients for billing purposes as hospital outpatients (but public awareness standard requires a department to be “held out to the public and to other payers” as part of the hospital)**

Hospital outpatient department must comply with Medicare three-day payment window rule***

Outpatient department must meet applicable hospital health and safety rules, including Life Safety Code

Hospital COP – Physical Environment (42 C.F.R. § 482.41)

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Standard – hospital must meet the applicable provisions of the 2000 edition of the Life Safety Code of the National Fire Protection Association (NFPA)

Exceptions CMS determines that State law adequately protects

patients Waiver if LSC application would result in unreasonable

hardship

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Hospital COP – Physical Environment

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12/17/2010 Letter from Director, Survey and Certification Group, to State Survey Agency Directors (S&C-11-05-LSC) (as revised 2/18/2011)

Amends SOM and certain appendices Noncontinguous facilities Effective immediately

Life Safety Code

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Mixed occupancy classifications Hospital “component facility” must be

adequately separated from the other building occupancies in order to be eligible for its own occupancy classification

If not adequately separated, the most stringent occupancy classification applies to the entire building

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Life Safety Code

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Three LSC classifications

Health Care Occupancy (most stringent)

Patients who are mostly incapable of self-preservation during an emergency

24/7

Sleeping accommodations

Life Safety Code

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Ambulatory Health Care Occupancy

Patients who are mostly incapable of self-preservation during an emergency

Not 24/7

No sleeping accommodations

Anesthesia services

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Life Safety Code

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Business Occupancy (least stringent)

Patients who are mostly capable of self-preservation during an emergency

Not 24/7

No sleeping accommodations

Does not provide anesthesia services

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Management Contracts Principle

Only applies to off-campus facilities subject to the provider-based requirements that are operated under a management contract

Main provider (or an organization that also employs the staff of the main provider and that is not the management company) must employ the staff who are directly involved in the delivery of patient care

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Management Contracts Principle

Exceptions

Personnel solely furnishing administrative services

Professionals who furnish patient care services of a type that would be paid under a fee schedule established under Part 414 (physicians, non-physician practitioners)

Compliance issues*

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Under Arrangements Principle

Provider-based status is not permitted for any facility or organization that provides all of its patient care services under arrangements

Intended to prevent hospital from using under arrangements coverage provisions to circumvent provider-based requirements

Hospital may not contract out entire department and claim it as provider-based

Unlike management contract principle, no distinction between on-campus and off-campus facilities or organizations

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Joint Ventures Principle Facility operated as a joint venture may be considered

provider-based if certain conditions are met: Facility is partially owned by at least one provider Facility is located on the main campus of a provider who is

a partial owner (does not have to be the majority owner) Facility is provider-based to the provider on whose campus

the facility is located Facility satisfies all applicable provider-based requirements,

including the financial integration requirement (shared income and expenses, facility costs reported in hospital cost center, and facility’s status incorporated and readily identified in hospital’s trial balance)

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Provider-Based Attestation

Favorable provider-based determination by CMS is no longer required

Benefits of seeking a provider-based determination Limit overpayment exposure forward (at least until

the occurrence of a “material change” that results in non-compliance)

Appears to limit overpayment exposure backward to complete attestation submission date (not for all cost periods subject to reopening)*

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Provider-Based Attestation

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Off-campus PBD primarily furnishing services regularly performed in a physician’s office (42 C.F.R. § 413.65(b)(4) includes presumption that facility is freestanding unless “CMS determines the facility has provider-based status”)*

Joint venture PBDs

Off-campus PBDs subject to a management contract

PBDs in which under arrangement services are furnished

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Hospital Services Furnished “Under Arrangements”

Hospital contracts with a third party vendor to provide services to hospital patients

Service is billed by the hospital as a hospital service but performed by the vendor

Vendor is paid a fee by the hospital and agrees to look solely to the hospital for payment

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Under Arrangements Principle, Coverage and Payment Conditions

Hospitals expressly permitted since 1966 to furnish items and services to patients through arrangements with third parties under the Medicare statute, regulations and manual provisions (42 U.S.C. §1395x(w); 42 U.S.C. § 1395x(b)(3); 42 C.F.R. §409.3; Medicare General Information, Eligibility and Entitlement Manual (Pub. 100-01), Chapter 5, § 10.3)

Payment of the hospital must discharge liability of beneficiary or any other party to pay for the items and services

Hospital cannot “merely serve as a billing mechanism”

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Under Arrangements

CMS has stated that a hospital furnishing “under arrangements” services only applies to a hospital obtaining “specialized health care services that it does not itself offer and that are needed to supplement the range of services that the provider does offer its patients” (67 Fed. Reg. 49981, 50091 (Aug. 1, 2002))

This purported limitation is not included in the Medicare statute, regulations or manuals*

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Under Arrangements

Effective October 1, 2011, routine services furnished under arrangement outside of a hospital are not recognized for Medicare payment purposes*

Room and board, dietary and nursing services Result? If performed outside hospital, only

diagnostic tests performed under arrangement for hospital patients are recognized for Medicare payment purposes

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Under Arrangements

Hospital exercises professional responsibility over arranged for services Accept patient for treatment in accordance with

admission policies Maintain complete and timely clinical record on

patient Maintain liaison with attending physician regarding

patient’s progress Hospital’s utilization review and quality assurance

programs apply to the service*

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Medicare Enrollment/Certification Medicare Enrollment Application Form CMS-855A

(new practice location) CMS acceptance does not indicate that agency has

determined that the facility meets the provider-based status requirements

SOM 2004 and 2024, and S&C-09-08 (Oct. 17, 2008) Remote location addition with acceptance of seller’s

provider agreement (seller’s CCN is “retired”) does not necessarily require a survey except if inpatient and/or surgical services are furnished

If facilities accredited, accreditation can’t be extended to acquirer who rejects provider agreement; new survey must be conducted and no billing privileges until survey performed and compliance determination made

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Medicare Enrollment/Certification

Mission Regional Hospital Medical Center v. Centers for Medicare and Medicaid Services, Dec. No. CR2458 (Nov. 2, 2011) Hospital acquires assets of another hospital and

intends to operate acquired hospital as a remote location

Acquiring hospital declined acquired hospital’s provider agreement

CMS refused to recognize remote location until it was successfully surveyed

Accept assignment/reject assignment? 34

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Medicare Enrollment/Certification

The Joint Commission Accreditation

Match between Joint Commission accreditation and hospital CCN

Multi-campus hospital (one CCN) must have one governing body, one unified medical staff and a common nursing staff

CMS proposed rule would enable a multi-hospital system to have one governing body under Medicare governing body CoP

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340B Drug Discount Program

Covered Entities (Disproportionate share hospitals, children’s hospitals, critical access hospitals, and sole community hospitals) may receive drugs for outpatients at discount price

Covered Entities’ PBD may also participate in 340B Drug Discount Program if they satisfy certain conditions. Covered Entity must include PBD on its Medicare cost report before the PBDcan be considered for participation

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Hospital Services Supervision Requirements

Apply only to outpatient services (at least for now)

Outpatient therapeutic services incident to physician services

Aid physician in treatment of patient

Must be performed in the hospital or in a PBD*

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Outpatient diagnostic tests

Examination or procedure to aid in assessment of a medical condition or identification of a disease

May be performed in the hospital, in a PBD, or in a non-hospital facility under arrangements

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Different supervision requirements for therapeutic services and some diagnostic tests

Services excluded from supervision requirements are those outpatient services that have their own statutory benefit and are not paid under the OPPS but rather under the MPFS, for example, outpatient diabetes self-management training services and lab tests

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Therapeutic Services Incident to Practitioner Services Supervision

Requirements 2012 Supervision may be performed by a physician

or by a certain nonphysician practitioner (clinical psychologist, licensed clinical social worker, physician assistant, nurse practitioner, clinical nurse specialist, or certified nurse mid-wife)

Services are furnished by or under arrangements by the hospital

Services are an integral although incidental part of practitioner’s services

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Supervision Requirements Therapeutic Services

Services are performed in the hospital or in PBD

Services are provided under the direct supervision (or other level of supervision as specified by CMS for the particular service) of a practitioner, subject to certain requirements

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Therapeutic Services Direct Supervision

Supervisory practitioner must be immediately available to furnish assistance and direction throughout the procedure

Temporal requirement, no specific physical boundary requirement

Supervisory practitioner cannot be so physically distant that he/she could not intervene right away

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Supervisory practitioner cannot be performing another procedure or service that he/she could not interrupt

Supervisory practitioner must have within his/her State scope of practice and hospital-granted privileges the knowledge, skills, ability, and privileges to perform the service

Supervisory practitioner must be clinically able to furnish the service himself/herself

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Supervisory responsibility is more than the capacity to respond to an emergency and includes the ability to take over the performance of the procedure or provide additional orders

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Hospital should have in place credentialing procedures, bylaws and other policies to ensure that outpatient services furnished to beneficiaries are provided only by qualified practitioners

For therapeutic services furnished under arrangement outside the hospital to patients, CMS expects that the services are being supervised appropriately

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Nonsurgical Extended Duration Therapeutic Services

Can last a significant period of time Have a substantial monitoring component that is

typically performed by auxiliary personnel Have a low risk of requiring practitioner’s

immediate availability after the initiation of the service

Are not surgical in nature

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Nonsurgical Extended Duration Therapeutic Services

Direct supervision is required during the “initiation” of the service, which may be followed by general supervision at the discretion of the supervisory practitioner

“Initiation” means the beginning portion of the service which ends when the patient is stable and the supervisory practitioner determines that the remainder of the service can be delivered safely under general supervision*

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Outpatient Diagnostic Tests Supervision Requirements 2012

Outpatient diagnostic tests are furnished by or under arrangements by participating hospital

Tests are ordinarily furnished by or under arrangements by a hospital for its outpatients for the purpose of diagnostic study

Tests would be covered as inpatient hospital services if furnished to an inpatient

Diagnostic tests furnished to hospital outpatients by an entity other than the hospital are subject to hospital unbundling rule

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Outpatient Diagnostic Tests

Particular diagnostic test must be performed under the appropriate level of supervision (general, direct, personal) as included in the quarterly updated MPFS Relative Value File

Physician must perform supervision, even if NPPis authorized to perform service under State law

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While NPPs cannot provide the required physician supervision when other hospital staff are performing diagnostic tests, when these NPPs personally perform a diagnostic test they must meet only the physician supervision requirements required under the Medicare coverage rules for that type of NPP. For example, a NP must simply work in collaboration with a physician and a PA must practice under a physician’s general supervision

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Outpatient diagnostic tests that require a physician’s direct supervision have the same immediately available, qualifications, and clinically appropriate/able conditions as outpatient therapeutic services

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Outpatient Therapeutic Services and Diagnostic Tests Compliance

Tips

Review PBDs by location (on-campus, off-campus) and by type of service (therapeutic, diagnostic)

Review hospital operations Appropriately designated supervisory physicians

(diagnostic) and physician/NPPs (therapeutic) Hospital bylaws Supervision agreements Immediate availability

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Outpatient Therapeutic Services and Diagnostic Tests Compliance

Tips

How is supervisory practitioner contacted

Verify compliance with supervision requirements for diagnostic tests (general, direct or personal)

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Potential Consequences for Non-Compliance With Supervision

Requirements

Recoupment of overpayments

Violation of Medicare Conditions of Participation for Hospitals

Federal False Claims Act knowing retention of overpayments*

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Stark Law – Generally Implicated if a hospital or other entity

providing DHS has a direct or indirect financial relationship with a physician (or immediate family member) Vendor of under arrangements services is a

physician or physician group, is owned by a physician or physician group or has a compensation relationship with a physician

Physician is participant or has compensation relationship with a provider-based joint venture

Physician is owner or has compensation relationship with manager of provider-based facility

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Stark Law – Under Arrangements

Under arrangements analysis – 2009 IPPS Final Rule Person or entity that “has performed services that are

billed as DHS” is a DHS entity Services billed as hospital inpatient or outpatient

services considered DHS even if not otherwise DHS (e.g., cardiac catheterization); except lithotripsy

Person or entity that “has presented a claim to Medicare for the DHS” also continues to be a DHS entity

Effective October 1, 2009

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Court challenge - Council for Urological Interests v. Sebelius

If physician has ownership or investment interest in under arrangements service provider –

Must meet an ownership exception under Stark Law if physician refers for the services that are provided under arrangements

Rural exception

Publicly traded securities

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Physician may own if does not refer

Pathologists, radiologists and radiation oncologists

Personally performed services

Relationship with hospital must still meet exception for direct or indirect compensation relationship

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When does an entity “perform services”? CMS declined to define Example – if physician group does medical work

and could bill for services, it performs the service Example – entity that merely leases or sells space

or equipment, furnishes supplies that are not separately billable, or provides management, billing services or personnel does not perform the service

What about package of space, equipment, supplies, services, and/or personnel?

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Stark Law – Per-Unit Payment

2009 IPPS Final Rule – Per-unit rental charges not permitted in space or equipment lease if reflect services to patients referred by the lessor to the lessee Effective October 1, 2009

Applies regardless of whether relationship is direct or indirect

Does not matter whether or not subject of lease is a DHS

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Stark Law – Percentage Payment

2009 IPPS Final Rule – Rental arrangements may not use percentage of revenue as compensation Percentage of revenue raised, earned, billed,

collected, or otherwise attributable to services performed or business generated in leased space or with leased equipment

Effective October 1, 2009

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Stark Law – Percentage Payment

Applies regardless of whether relationship is direct or indirect Parallel changes made to Stark exceptions for space

leases, equipment leases, fair market value compensation arrangements, and indirect compensation arrangements

Broader language than per-unit prohibition – no limit based on whether services are to patients referred by lessor to lessee

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Stark Law – Hybrid Relationship

What if provide services and equipment? 1/22/09 FAQ – Physician owned partnership may

provide lithotripsy services under arrangements to a hospital and be paid on a per-unit or percentage basis if furnishing service or package of services and not merely leasing equipment over which hospital has dominion or control Phase II Regulations - may provide “tools of the trade” in

connection with services Effect for other services provided to hospital – if entity

meets this test is it “performing services” billed as DHS and therefore itself a DHS entity?

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Anti-Kickback Statute

Implicated in financial relationships with parties that also have referral relationship - whether or not physician

2008 MPFS Proposed Rule – Discussion of Stark Law Proposals Hospital-physician ventures providing imaging services

previously provided directly by hospitals described as allowing referring physicians “to make money on referrals”

IDTF and ASC ventures between hospitals and specialists that provide services under arrangements described as being “little more than a method to share hospital revenues with referring physicians”

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Inability to predict in advance the precise amount of services or precise intervals during which they will be provided, and therefore set aggregate compensation, often precludes use of personal services and equipment lease safe harbors

Analysis of facts and circumstances

Guidance to consider – safe harbors, joint venture fraud alert, supplemental compliance guidance for hospitals, special advisory bulletin on contractual joint ventures, questions for consideration in submitting advisory opinion request, advisory opinions

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2010 Sleep Lab Services Advisory Opinions OIG Advisory Opinions 10-14, 10-23 and 10-24 All addressed under arrangements relationship

between hospital and sleep lab services company Company had no physician or hospital ownership Favorable opinions

10-14 – per unit fee, no marketing services 10-24 – fixed fee, full-time marketing services

Unfavorable opinion 10-23 – per unit fee, part-time marketing services

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Suspect characteristics in under arrangements transactions: Hospital pays above market rates to influence referrals.

Entity is in a position to influence referrals if it provides marketing services, has independent patient base, or is owned by referral sources.

Entity accepts below-market rates to secure referrals from hospital to entity, its owners or affiliates.

Hospital owns an interest in the entity so that investment returns may reward referrals. This also raises specter of undue influence in awarding contract.

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Referral source for hospital owns an interest in the entity. Even if services at fair market value, referral source could condition other referrals to hospital on award of contract.

Transaction includes furnishing items or services outside scope of under arrangements services, or furnishing items or services to patients who are not hospital patients.

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Safeguards Ordering and interpreting physicians have no financial

relationship Hospital payment to entity not conditioned on its

receipt of payment for tests Hospital assumes business risk and contributes

substantially – space, furnishings, medical director, administrative services

Opinions conditioned on compliance with Medicare under arrangements coverage and payment requirements

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Recent Developments

New CMS policy for practitioners ordering hospital outpatient services

Therapy caps extended to therapy services furnished in hospital outpatient departments

HHS OIG Work Plan for FY 2012 - OIG is reviewing physician coding for professional services furnished in hospital outpatient departments

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Recent Developments

Clarification of application of three-day window to nondiagnostic services

Medicare State Operations Manual, Appendices A, I and W revised to expressly describe the specific Life Safety Code requirements that apply to various types of provider-based facilities

Mission Regional Hospital Medical Center v. Centers for Medicare and Medicaid Services

Recent Developments

TJC accreditation of multi-campus hospitals –single governing body, unified medical staff and common nursing staff

CMS proposed revision of Medicare CoP for hospital governing bodies to enable system with multiple hospitals and separate CCNs to have a single governing body

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Recent Developments CMS clarifies in 2012 OPPS Rule that therapeutic

services and supplies with own benefit category that are paid under OPPS are subject to same payment conditions as therapeutic incident to services

CMS Chicago RO denies provider-based status based in part on shared space

CMS issues proposed rule governing overpayments

Council for Urological Interests v. Sebelius

Documents

Provider-Based Status, Under Arrangements, … (PBD) of the hospital to ... Mixed occupancy classifications ... Match between Joint Commission accreditation and hospital CCN