December 8, 2019

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Legislation to Expand Definition of Grandfathered Off-Campus Hospital Departments to Address “Mid-Build” and Cancer Hospital Projects Moves Forward

A bill amending the “site neutrality” limitations brought by Section 603 of the Bipartisan Budget Act of 2015 was introduced in the House of Representatives last week and passed out of committee yesterday. H.R. 5273, the “Helping Hospitals Improve Patient Care Act of 2016,” was introduced by two powerful Members of the House Ways and Means Health Subcommittee: Chairman Pat Tiberi (R-OH) and Ranking Member Jim McDermott (D-WA). The proposed amendments expand upon the definition of off-campus outpatient hospital departments (OCODPs) that are excluded from the limitations of Section 603. Section 603 does not apply to those OCODPs that are grandfathered or are Dedicated Emergency Departments for EMTALA. Those OCODPs may continue to bill at the higher rates under the Medicare Outpatient Prospective Payment System (OPPS). All other new OCODPs must bill Medicare at freestanding rates. The rules as to how those rates will be determined and other implementing requirements are anticipated this summer in the OPPS rules. For further information on the impacts of BiBA on OCODPs generally see our blog post on this topic: Bipartisan Budget Act Section 603’s Impact on Off-campus Hospital Departments.

As adopted, Section 603 grandfathered any OCODPs that were billing as a hospital department on or before the bill was enacted on November 2, 2015. The proposed bill adds three new categories of OCOPDs who may bill under OPPS:

  1. departments that submitted “provider-based” attestations prior to December 2, 2015;

  2. mid-build OCOPDs; and

  3. OCODPs associated with cancer hospitals

Provider-Based Attestations Prior to December 2, 2015

The first amendment applies to OCOPDs that bill under OPPS for services furnished in prior to the date of enactment (November 2, 2015) if the provider filed a provider-based attestation under 42 C.F.R. 413.65 before December 2, 2015. This narrow exception expands the grandfathered facilities to a very few facilities for which the providers had submitted attestations shortly after enactment – effectively providing a one month grace period – presumably even if bills had not been dropped prior to November 2, 2015. But it appears that some OPPS-covered services must have been furnished prior to November 2 in order to qualify for this grace period. This exception offers no relief on an ongoing basis if attestations were not timely submitted and bills were not dropped prior to November 2, 2015.

Mid-Build Projects

The mid-build exception applies in 2018 and after to facilities that meet the “mid-build” requirement. The “mid-build” requirement means that before November 2, 2015 the provider entered into a written agreement with an “outside unrelated party for the actual construction” to build the OCODP. A non-binding letter of intent, business plan or other non-binding contract is very likely insufficient. Commencement of actual construction is not required, though it is a likely reading that the construction needs to be substantially complete prior to December 31, 2016. Again, this exception only applies to those hospitals with binding written agreements in place prior to November 2, 2015. It provides no relief for other “under development” OCODPs. To take advantage of this limited relief, the hospital must submit the following:

  • A provider-based attestation not later than December 31, 2016;

  • Proper provider enrollment information; and

  • Written certification from the Chief Executive Officer or Chief Operating Officer that the facility meets the “mid-build” requirements prior to December 31, 2016.

The requirement of submitting an attestation likely means that the construction is essentially complete by December 31, 2016.

Cancer Hospital OCODPs

The final amendment would provide relief to specifically certified cancer hospitals. There are only a small number of such hospitals nationally. This amendment will be applied to services furnished in 2017 and beyond. Under current regulations, the provider-based attestation process as to any hospital (including cancer hospitals) is voluntary.

The new amendments would require cancer hospitals to submit provider-based attestations if they want to take advantage of the relief from Section 603. Cancer hospital OCOPDs that met the provider-based requirements after November 1, 2015, but before the amendment’s enactment, will have to submit a provider-based attestation within 60 days of enactment. Alternately, cancer hospitals OCOPDs that meet the provider-based requirements after enactment have 60 days from when they meet the provider-based requirements to submit an attestation.

Cancer hospital OCOPDs that were billing under OPPS prior to November 1, 2015 likely need not submit a provider-based attestation.

The proposed amendment also includes an audit requirement for OCOPDs submitting provider-based attestations to meet the “mid-build” requirement as well as the new cancer hospital OCOPD requirements. The Secretary will audit an OCOPD’s compliance with the attested-to requirements for mid-build projects before December 31, 2018. For cancer hospitals, the Secretary will audit compliance within two years of receiving its attestation. Therefore, if passed as-is, it is essential that each OCOPD rigorously comply with the requirements summarized above.

Previous efforts to amend the OCOPD language in the Bipartisan Budget Act of 2015 were unsuccessful. A Senate companion has not yet been introduced, but significant support exists in the Senate for changes to the current OCOPD policy. The Centers for Medicare and Medicaid Services are likely to issue regulations around implementation of the current OCOPD policy in the coming months.

© 2019 Foley & Lardner LLP


About this Author

Lawrence W. Vernaglia, Health Care Attorney, Foley Lardner Law Firm

Lawrence Vernaglia is a partner and health care lawyer with Foley & Lardner LLP and serves as chair of the firm’s Health Care Industry Team – named “Health Law Firm of the Year” for three of the past four years on the U.S. News - Best Lawyers® "Best Law Firms" list. Mr. Vernaglia represents hospitals, health systems and academic medical centers and a variety of other health care providers. Mr. Vernaglia's practice involves regulatory and transactional matters, including Medicare/Medicaid reimbursement compliance advice and appeals; mergers, acquisitions and...

Taylor E. Whitten, Foley Lardner, Chicago Labor Lawyer, Health Care Attorney

Taylor E. Whitten is an associate with Foley & Lardner LLP. She is a member of the firm’s Health Care Industry Team and the Labor & Employment Practice.

Ms. Whitten was a summer associate with Foley in 2013. Prior to joining Foley, she was a PILI fellow for the Chicago Lawyers’ Committee for Civil Rights Under Law. Ms. Whitten also served as student law clerk to both the Office of the Public Defender and the U.S. Attorney’s Office.

Ms. Whitten has worked as regional field director for Service Employees International Union. She managed a team of eight organizers in order to execute presidential and congressional campaigns across two counties.

Before her legal career, Ms. Whitten was a research assistant at Johns Hopkins Bloomberg School of Public Health, where she reviewed articles for the World Health Organization evidence-based meta-analysis research project.

Jennifer F. Walsh, public affairs director, Foley law firm
Director, Public Affairs

Jennifer F. Walsh is a public affairs director with Foley & Lardner LLP. She has extensive experience in government affairs, including a lengthy career as a senior staffer in the U.S. Congress and the California Legislature, and as a vice president for Federal Government Affairs at a top 20 Fortune 500 health care company. Ms. Walsh has effectively advanced key issues before the United States Senate, House of Representatives and the Administration. She is a member of the firm’s Government & Public Policy Practice.