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CMS “Hospitals Without Walls” Flexibilities

In an interim final rule (CMS-5531-IFC, published at 85 Fed Reg 27550 on May 8, 2020) CMS used its special Pubic Health Emergency waiver authority under Section 1135(b) of the Social Security Act to authorize hospitals to provide care in “temporary expansion sites.” This technically involves changes to several regulatory frameworks.

One of the most frightening risks of the COVID-19 pandemic is the potential for health systems to become overwhelmed. Many regions of the country have seen rapid, often unpredictable increases of cases requiring intensive care and extended hospitalization, prompting serious concerns about bed capacity. In an effort to allow hospitals to maximize capacity and create more effective physical separation between COVID-19 and non-COVID-19 patients, CMS has authorized new regulatory flexibility to support “hospitals without walls” models. In theory, these models will allow hospitals to provide hospital-level care for patients in non-traditional settings including their homes. However, in practice hospitals should be aware of a number of open issues and regulatory complexities involved with delivering care in such locations.

First, CMS waived a number of the hospital “conditions of participation” (or CoPs). These rules reflect the minimum standards hospitals must meet in order to receive Medicare reimbursement for hospital services. CMS did not waive all of the CoPs, but it waived important rules including provisions on the “physical environment” hospitals must maintain. Any location still must be consistent with a state’s emergency preparedness or pandemic response plan.

Second, CMS used its waiver authority to create a number of changes to the rules on provider-based hospital locations. Last year, CMS finalized rules allowing temporary relocation of provider-based sites during traditional, time-limited emergencies (such as hurricanes). A hospital could apply to its CMS Regional Office (RO) for permission to temporarily relocate a provider-based location, although the RO had discretion to approve or deny such a request. For purposes of COVID-19, CMS builds on this flexibility to allow a broad expansion of hospital locations. Relocations of an on-campus or “excepted” provider- based off-campus department must still be approved by the RO, but a hospital may relocate an “unexcepted” provider- based off-campus department without any additional approval. (A provider- based department is “excepted” if it was established before January 1, 2017, and can bill a facility fee under the Hospital Outpatient Prospective Payment System) CMS also stated that inpatient departments can take advantage of this flexibility, although the agency was silent on any notice obligation.

Further, a single department may now be split between multiple locations, so that a hospital could theoretically extend the enrollment of one of its hospital outpatient departments to cover multiple patients’ homes. These flexibilities raise  the exciting possibility of providing hospital-level care in patients’ own homes, potentially reducing infection risk, preserving hospital capacity for the highest-acuity patients, and improving patient satisfaction. However, a number of legal and operational risks continue to exist in this model. The appropriateness of care provided at home will depend on the clinical needs of each patient — patient acuity, co-morbidities, or the nature of required services may make in-home care inappropriate for some patients. As with any departure from traditional practices, a hospital’s decision to provide care in a patient’s home or other non-traditional location will likely be scrutinized in any future medical malpractice action. CMS’s waiver authority also does not affect state law and, in fact, the waivers are expressly conditioned on compliance with state law. Hospitals should carefully review their state licensing rules and other standards to determine whether these rules (including any special Executive Orders or emergency regulations applicable during the pandemic) allow in-home care. Many state laws remain silent on this possibility, but state officials may be willing to work with hospitals to align rules with CMS standards.

Further, hospitals should be aware that CMS has only waived some — not all — of the CoPs. Medicare still requires hospitals to comply with important rules including requirements around providing 24-hour nursing care and discharge to a “safe environment.” The applicability of certain CoPs may depend on the nature of the services to be provided in patients’ homes, and a hospital may need to work with CMS to obtain additional clarity on the specific rules applicable to their desired use case.

Finally, the “hospitals without walls” rules are built on the Public Health Emergency waivers, and CMS has not suggested it may extend these rules further. These regulatory considerations will also guide a number of operational considerations. Hospitals may be required to revise staffing obligations, invest in additional technology (particularly telehealth technology), and amend supply agreements to serve a variety of new locations.

While the “hospitals without walls” model may be attractive for certain locations and some kinds of patients, hospitals should be aware of the significant policy, legal, and operational considerations necessary to operate such a model. Working with competent legal counsel will be essential to implementing this kind of structure successfully.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 217

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About this Author

Neal Shah, Polsinelli Law Firm, Healthcare Law Attorney
Associate

Neal Shah applies his experience in government, private practice, and health care delivery to help identify practical legal solutions to complex regulatory and transactional problems, including:

  • Helping clients comply with the Stark Law, Anti-Kickback Statute, and similar federal and state fraud and abuse laws
  • Establishing and operating Accountable Care Organizations and other coordinated care arrangements
  • Completing self-disclosures of over payments of fraud and abuse liability, including through the CMS Voluntary Self-Referral Disclosure Protocol (SRDP) and...
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