On January 19, 2021, CMS announced the results of its audit of off-campus outpatient departments claiming the “mid-build” exception following enactment of the 21st Century Cures Act (the Cures Act). Of the 334 providers that CMS audited, only 132 providers qualified for the mid-build exception. The Cures Act required that CMS complete these audits no later than the end of CY 2018, but CMS only announced the results of those audits on the last full day of the prior administration. Despite the long delay, CMS had previously stated that hospitals that reasonably believed they qualified for the exception could bill for services provided in mid-build facilities at full Outpatient Prospective Payment System (OPPS) rates. Denials now call into question whether affected hospitals must repay the difference between excepted and non-excepted rates for nearly four years of claims. King & Spalding has received feedback from many hospitals that audit determinations are conclusory and do not include underlying work papers supporting denials. The Cures Act provides no administrative or judicial review rights for individual audit determinations.

When the Bipartisan Budget Act of 2015 was enacted, only existing off-campus provider-based departments (and several others) were permitted to be paid by Medicare through OPPS. New off-campus departments would be paid according to the Physician Fee Schedule. When enacted on December 13, 2016, the Cures Act offered an exception for provider-based departments that were “mid-build” when the Bipartisan Budget Act of 2015 was enacted. Meeting the exception would allow the department to continue to be paid under OPPS.

The Cures Act required CMS to audit all providers seeking the mid-build exception. The audit process reviewed the following requirements:

• The hospital must have timely filed an attestation within 60 days after the enactment of the Cures Act.
• The attestation must support a finding that the department is provider-based under 42 CFR § 413.65(b)(3).
• The chief executive officer or chief operating officer of the provider must have submitted a certification (before 60 days elapsed after the Cures Act enactment) stating that the off-campus provider-based department meets the “mid-build” definition.
• The “parent” provider must have reported the off-campus provider-based department through submission of a change to its CMS-855A enrollment form (adding the location).
• The provider must have entered into a binding written agreement with an outside, unrelated party for the actual construction of the department before November 2, 2015.

CMS started the audit process in July 2018. CMS noted it completed the audit reviews prior to the COVID-19 public health emergency but, following associated delays, it issued the determination letters to providers on January 19, 2021.

As noted above, CMS announced that, depending on the provider’s specific audit results, the audited provider may either have received overpayments (or may have been underpaid for services provided by the off-campus provider-based department during the auditing process if it had not billed for services at the full, excepted OPPS rate). CMS stated it will “afford all providers a total of 240 days to address any overpayments” due to the audit findings. For providers receiving overpayments, CMS notes that the Extended Repayment Schedule (ERS) may be available.

CMS’s fact sheet on the mid-build audit results is here. CMS’s overview of the mid-build audits is available here, and the audit process FAQs from June 2018 are available here.