On November 2, President Obama signed into the law the Bipartisan Budget Act of 2015 (the “Act”), which contains language that will significantly change how hospital-based outpatient care is reimbursed.

Currently, off-campus hospital outpatient departments (“HOPDs”) that comply with Medicare’s provider-based standards are eligible for reimbursement under Medicare’s outpatient hospital prospective payment system (“OPPS”). Section 603 of the Act will exclude provider-based HOPDs from the OPPS begging in January 1, 2017, with the exception of grandfathered HOPDs who were billing under the OPPS as of November 2, 2015.

New provider-based HOPDs who begin billing Medicare after November 2, 2015, will be eligible for reimbursement under either the ambulatory surgery center prospective payment system or the physician fee schedule, which generally contain lower reimbursement rates than the OPPS.

This represents a major shift in HOPD reimbursement and may curtail hospital investment in off-campus facilities in order to convert those facilities to provider-based departments. It will also likely have various ripple effects on transaction structures and delivery of care models.