Physician Practice

Some provider-based outpatient departments could see facility rates cut in half

Physician Practice Insider, August 7, 2017

CMS is proposing to set payments for certain services performed by non-exempt off-campus provider-based hospital outpatient departments at 25% of the hospital outpatient prospective payment rate next year, down from 50% this year.

The additional cut could cause provider-based hospital outpatient departments (PBDs) to become financially non-viable, worries Lawrence W. Vernaglia, a partner with Foley & Lardner LLP in Boston, whose clients include a number of hospitals with PBDs.

“All of these facilities are required to look in every way like a hospital outpatient department,” he explains. “They have all that overhead.” But with Medicare proposing to cut their facility fees in half for the second year in a row, Vernaglia says, there is a question how PBDs will meet those costs.

Starting this year, CMS began paying PBD facility fees from the Medicare physician fee schedule for non-exempt PBDs instead of the hospital outpatient prospective payment system, under a requirement from the Balanced Budget Act of 2015.

Section 603 of that law was “intended to eliminate the Medicare payment incentive for hospitals to purchase physician offices, convert them to off-campus PBDs and bill under the OPPS for items and services they furnish there,” the agency states in the proposed 2018 Medicare physician fee schedule. 

However, Vernaglia contends that the centers are not merely enhanced physicians’ offices but fully functioning outpatient centers, providing a range of services including diagnostic testing, imaging, clinical lab, rehabilitation and physician visits, as well as surgical procedures. 

Some PBDs are emergency departments, though those services are considered exempted and continue to receive payment under the OPPS. PBDs also are exempt from the reduced payments if they were established prior to Nov. 2, 2015, when the law took effect, or if the center is located within 250 yards of a remote location of the hospital, CMS explained in the proposed 2017 physician fee schedule.

On the positive side, Vernaglia says, CMS dropped the idea of placing limits on the expansion of services by exempt PBDs, as the agency outlined in the proposed OPPS rule. That means that if a PBD is exempt, every service it provides is also exempt, Vernaglia explains.


This article was originally published in Part B News.


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