Q&A: CMS Knowledge of Provider-Based Departments

Q. How is CMS made aware of the fact that a hospital is operating a provider-based department?

A. Hospital leaders may naively believe that CMS has no definite method of ascertaining that the hospital is operating a specific provider-based department. However, there are several ways in which CMS may become aware that a hospital is operating a provider-based department.

First, hospitals are required to submit annual cost reports that list the cost centers and departments operated by the hospital. CMS may become aware of a provider-based department’s existence by examining these cost reports, especially in instances where the department is housed in buildings outside of the main hospital, because the addresses of these departments may be disclosed on the cost report. Based on that disclosure, CMS may begin an audit of the use of that provider-based department for that cost-reporting period and all prior periods.

CMS may also become aware of provider-based departments through routine certification and recertification surveys, even those performed through deemed status accreditation agencies like the Joint Commission. When completing those surveys, the hospital is required to list the departments/units that are to be included in the survey process, which would (and should) include a list of provider-based departments and their addresses. CMS may also conduct complaint surveys submitted by patients who received services furnished in the provider-based departments, and thus become aware that the hospital is furnishing services in a certain location. Based on that, CMS may conduct audits of the use of that provider-based department in all prior periods.

CMS also receives notification that the hospital is operating a provider-based department if the hospital decides to submit a voluntary attestation for that department. Hospitals expect that CMS will scrutinize the operations of the provider-based department beginning on the date of the attestation. They may not be aware, however, that CMS will not limit its scrutiny to the department’s operations after the date of the voluntary attestation. Instead, CMS very well may audit the use of the department for cost-reporting periods prior to the date of the attestation.

For more information, see the book Provider-Based Entities: A Guide to Regulatory and Billing Compliance.

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