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From Health Law Daily, June 17, 2016

Is CMS doing enough to oversee provider-based facilities?

By Harold Bishop, J.D.

The HHS Office of Inspector General (OIG) continues to support its previous recommendations and those of the Medicare Payment Advisory Commission (MedPAC) to either eliminate the provider-based facility designation or equalize payment for the same physician services provided in different settings. If CMS decides not to seek authority to implement either of these recommendations, the OIG suggests that it: (1) implement systems and methods to monitor billing by all provider-based facilities; (2) require hospitals to submit attestations for all their provider-based facilities; (3) ensure that regional offices and Medicare Administrative Contractors (MACs) apply provider-based requirements appropriately when conducting attestation reviews; and (4) take appropriate action against hospitals and their off-campus provider-based facilities that do not meet the requirements for provider-based designation (OIG Report, OEI-04-12-00380, June 17, 2016).

Provider-based facility. "Provider based" is a Medicare payment designation that allows facilities owned by and integrated with a hospital to bill Medicare as a hospital outpatient department, resulting in the receipt of higher payments than freestanding facilities. Provider-based facilities, which may be on or off the main hospital campus, must meet certain requirements, such as operating under the same license as the hospital. In addition, hospitals may, but are not required to, attest to CMS that their provider-based facilities meet requirements to bill as a hospital outpatient department.

OIG study. Since 1999, the OIG has identified vulnerabilities associated with the provider-based designation, including oversight challenges and increased costs to Medicare and its beneficiaries, with no documented benefits. Based on these challenges and the increased costs, the OIG recommended eliminating the provider-based designation, while MedPAC has recommended equalizing payment for selected services provided in hospital outpatient departments and physician offices.

Findings. The OIG study found that: (1) half of hospitals surveyed owned at least one provider-based facility, but CMS does not determine whether all meet provider-based billing requirements; (2) CMS is taking steps to improve its oversight of provider-based billing; however, vulnerabilities remain; (3) more than three-quarters of the 50 hospitals the OIG reviewed that had not voluntarily attested for all of their provider-based facilities owned off-campus facilities that did not meet at least one requirement; and (4) CMS reported challenges with the provider-based review process primarily because of difficulties obtaining documentation.

CMS response. CMS partially concurred with the OIG’s first recommendation to implement systems and methods to monitor billing by all provider-based facilities. CMS does not believe it is prudent to focus its resources on distinguishing among services provided in on-campus provider-based facilities and those on the main campus of the hospital.

CMS did not concur with the OIG’s second recommendation to require hospitals to submit attestations for all of their provider-based facilities. CMS stated that it shares OIG’s concerns about vulnerabilities in provider-based billing and described steps it has taken to address this issue. These include implementing a new modifier and place-of-service codes for claims furnished in an off-campus provider-based facility.

CMS concurred with the OIG’s third and fourth recommendations.

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