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Be Prepared: Provider-Based Mid-Build Audits Are Here

Hospitals with off-campus provider-based departments (“PBDs”) under construction (or “mid-build”) at the time of the Bipartisan Budget Act of 2015 – which limited Medicare payment to off-campus provider-based departments that were not operational prior to November 2, 2015– have been waiting years for Medicare to confirm the provider-based status of these locations. With mid-build audits underway, it appears hospitals are one step closer to that goal. 

Under the “mid-build” exception, an off-campus PBD is exempt from the Medicare payment limitation if the main provider (1) had a binding written agreement with an “outside unrelated party for the actual construction” of the PBD before November 2, 2015; and (2) submitted a written certification of its mid-build status, signed by its Chief Executive Officer or Chief Operating Officer, to the Medicare Administrative Contractor by February 13, 2017. By statute, CMS must audit compliance with the mid-build requirement by no later than December 31, 2018. 

Those audits have begun to move forward; as the first line of business, Medicare contractors are requesting a copy of the binding written agreement for the off-campus PBDs of interest. While this may be straightforward in some instances (e.g., a single construction contract), in others it may require multiple contracts and additional explanation (e.g., leased hospital space built-out to PBD specifications). The extent to which contractors will entertain back-and-forth dialogue during these audits is unclear, but given the lack of appeal rights afforded to mid-build applicants, it is important for hospitals to respond promptly and thoroughly. 

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume VIII, Number 204


About this Author

Sara Iams, Polsinelli Law Firm, Health Care Attorney

Sara Iams collaborates with clients and colleagues to navigate the complex health care regulatory environment. As a result, she helps clients achieve their desired business objectives.

Sara regularly counsels clients with respect to Medicare and Medicaid reimbursement matters, as well as general fraud and abuse issues. In doing so, Sara is not afraid to ask the difficult questions, and she pursues the answers with a steadfast attention to detail.

Kyle A. Vasquez, Polsinelli, Compliance Support Lawyer, Health Care Reform Attorney

Kyle Vasquez provides pragmatic legal and compliance support to a wide range of health care clients. He utilizes his background in health law and his prior experience as a health care consultant to develop creative approaches that address the unique challenges that health care providers face. Kyle works collaboratively with health care stakeholders to assist in identifying forward-thinking models that meet their financial and operational needs. Kyle represents a broad set of health care entities including multi-hospital health systems, community hospitals, FQHCs, institutional and retail pharmacies, and physician practices, among others.

Ross E. Sallade, Polsinelli PC, Medicare Enrollment Lawyer, Diligence Reports Attorney

Ross Sallade provides value to clients by tackling the complex legal regulatory, operational, reimbursement and enrollment matters that others might be reluctant to handle. Ross does so by drawing upon specialized knowledge for each matter which enables him to quickly evaluate urgent issues and provide practical recommendations. He also leverages a unique skill set that enables him to identify and work with the right federal and state regulators to pinpoint the heart of the issue and make recommendations to reach appropriate resolution. His previous experience...


Colleen Faddick's practice includes advising clients regarding the structure of and relationships among health care providers and entities within the complex federal and state regulatory environment. Colleen focuses on Medicare and Medicaid reimbursement and enrollment issues and appeals, fraud and abuse and self-referral law issues, licensing and certification of health care entities, clinical trial compliance and agreements for sponsors and providers, medical device payment and manufacturer relationships with physicians. Colleen works with hospitals, large physician...