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Budget Deal Alters Reimbursement to Off-Campus Hospital-Owned Facilities

On November 2, 2015, President Obama signed into law H.R. 1314, the Bipartisan Budget Act of 2015 (the "Act"), which significantly changes Medicare reimbursement for off-campus hospital services. The Act, which Congress passed late last week, will alter Medicare reimbursement for new off-campus hospital-owned facilities that have heretofore been treated as "hospital-based." Off-campus facilities for which a hospital was not billing as "hospital-based" as of the date of the enactment of the Act will not be treated as "hospital-based," and the physician or other provider's fee schedule rate, instead of the hospital outpatient rate, will apply.

Prior to the Act, covered out-patient department ("OPD") services included services provided by facilities meeting the complex hospital-based rules, even if the facility was not physically-located on the campus of the hospital. Subject to the grandfather provision discussed below, the Act adds a specific exclusion to the definition of covered OPD services, making services furnished by an off-campus outpatient department of a hospital ineligible. The Act provides that a facility is "off-campus" if it is not within 250 yards of the hospital's main buildings (including for this purpose, a "remote location of a hospital," meaning a separate in-patient campus of the hospital, which is a helpful clarification in an otherwise problematic law). Facilities deemed "off-campus" are ineligible for Medicare reimbursement at the hospital outpatient rate.

The inclusion of a grandfather provision will mitigate some of the Act's impact, as facilities currently treated as "hospital-based" will not be impacted by the change in law. Only facilities that are not billing as "hospital-based" as of the date of enactment will be ineligible for reimbursement at the hospital outpatient rate. It is unclear whether a conveyance of an off-campus grandfathered facility would eliminate the grandfathered status and the ability of the buyer to bill for the services as "hospital-based." The Congressional Budget Office ("CBO") forecasts that the government will reap significant cost savings from the lower rates that will apply; an October 28, 2015 analysis from the CBO projects that the change in reimbursement policy will provide $9.3 billion in relief by 2025.

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© 2021 Proskauer Rose LLP. National Law Review, Volume V, Number 311
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About this Author

Edward S Kornreich, Health Care, Proskauer Law Firm
Partner

Past long-standing Chair of the Health Care Department, Ed Kornreich is a recognized authority on the legal, regulatory and business issues related to health care services.

212-969-3395
Roger A. Cohen, Health Law Attorney, Proskauer Law Firm
Associate

Roger Cohen is a senior Associate in the Health Care Department. His practice focuses on representing health care and life science clients, including academic medical centers, hospitals, physician organizations, health information technology and medical device companies, private equity firms, and other financial institutions in a wide array of health care regulatory matters.

Law360 recognized Roger as a 2014 “Rising Star,” naming him as one of the top health care lawyers in the country under age 40. Similarly, SuperLawyers named Roger a New York Metro Rising Star...

212-969-3114
Julia Bienstock, Health Care Attorney, Proskauer Rose Law Firm
Associate

Julia Bienstock is an associate in the Health Care Department. Her practice focuses on representing health care clients, including hospitals, academic medical centers, physician organizations, private equity firms, and other financial institutions. Julia provides legal advice on a wide range of regulatory, transactional and litigation matters, including areas such as reimbursement, HIPAA, fraud and abuse issues, and various other regulatory and compliance matters.

Julia also maintains an active pro bono practice, representing not-for-profit...

212.969.3322
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