CMS finalizes a new modifier and alternate payment system for off-campus provider-based departments

by Kimberly Anderwood Hoy Baker, JD, CPC

In the 2017 OPPS proposed rule, CMS proposed several provisions to interpret and implement Section 603 of the Bipartisan Budget Act of 2015. In the final rule, they finalized some proposals, offering flexibility in some areas related to the definition of “excepted” services, which will continue to be paid under the Outpatient Prospective Payment System (OPPS). Additionally, they did not adopt their original proposals for an alternate payment system for “non-excepted” services, but rather proposed payment under the Medicare Physician Fee Schedule through an entirely new “site of service specific” payment rate triggered by a new modifier (-PN).

Excepted Departments

CMS defined three types of “excepted” departments under the proposed rule, all of which would continue to be paid under the OPPS:

• On-campus departments, including departments on the campus of a remote location
• Dedicated emergency departments (DED)
• Grandfathered Off-campus Provider-Based Departments (PBD) billing as of November 2, 2015

On-campus departments

CMS had to address on-campus departments because Section 603 defines them slightly differently than provider-based regulations. Provider-based regulations define on-campus as within 250 yards of the main provider. Section 603, on the other hand, also treats departments within 250 yards of a remote location as on-campus as well and therefore also exempt from the new alternate payment system.

Provider-based regulations define a remote location of a main provider as a location providing inpatient service under the ownership and control of the main provider, presumably off the campus of the main provider. However, remote locations do not include satellite facilities, which provide inpatient services in a building or on a campus used by another hospital.

In the final rule, CMS confirmed that if any part of the outpatient PBD is within 250 yards of any point of the physical facility of the remote location or main provider, it meets the definition of on-campus. They stated this was consistent with their historical interpretation of the 250-yard test and confirmed hospitals should use surveyor reports or other documentation that show that a department is within 250 straight line yards. These on-campus departments will be “excepted” from the alternate payment system and will continue to be paid under the OPPS.

Dedicated emergency departments

Section 603 exempts DEDs from application of the new off-campus alternate payment system. The definition of a DED for purposes of departments “excepted” from Section 603 is the same as the EMTALA definition. It includes licensed emergency departments, departments held out to the public for emergency care, and departments that provide at least 1/3 of their patient visits for emergency care without an appointment. Providers undoubtedly have already evaluated each off-campus provider-based department for purposes of EMTALA compliance, so determining “excepted” emergency departments will be fairly easy.

CMS finalized their policy to extend the “excepted” status of DEDs to all emergency and non-emergency services provided at off-campus DEDs. This means that all services rendered at off campus DEDs will be considered to be “excepted” services and will continue to be paid under the OPPS, regardless of the emergency nature of the service.

Grandfathered departments

CMS had proposed that services must meet two tests to be grandfathered in under Section 603 and continue to be paid under OPPS: They must be provided in the grandfathered department as defined by CMS and be in the same clinical family as services the department was billing prior to November 2, 2015. CMS finalized much of its guidance on the definition of grandfathered departments but, based on provider comments, did not finalize the second part of the test related to clinical families.