In an August 26, 2016, letter to the Centers for Medicare & Medicaid Services (CMS), the American Hospital Association (AHA) expressed serious concern over the portion of the calendar year 2017 hospital outpatient prospective payment system (OPPS) proposed rule that would implement the site-neutral payment provision of the Bipartisan Budget Act of 2015 (Act). Specifically, the AHA is alarmed that the proposed site-neutral policies raise significant compliance risks under the federal physician self-referral law (Stark Law) and the federal Anti-Kickback Statute.
It has been clear since passage of the Act that off-campus hospital outpatient departments (HOPDs) that relocated, changed service lines or began billing under OPPS on or after November 2, 2015, would no longer receive facility fees under the OPPS. What was not known prior to the publication of the proposed OPPS rule is how CMS would implement the new payment regime. Pursuant to the proposed rule, sole payment would be rendered under the Medicare Physician Fee Schedule to the physician who performed the service.
Further, the proposed OPPS rule provides that HOPDs that are not excepted from the new site-neutral provision are still considered “HOPDs,” as that term is defined in Medicare regulations. Under the Medicare definition, the financial operations of the HOPD must be fully integrated within the financial system of the hospital. In practice, hospitals routinely cover HOPD overhead expenses, such as costs associated with the building, equipment, nonphysician clinical staff, supplies, patient medical records, etc.
Though hospitals would remain obligated under Medicare regulations to integrate the expenses of affected HOPDs, the proposed rule would end all reimbursement that the hospital previously received from the government for providing such services. At the same time, physicians providing services at off-campus HOPDs would be paid by Medicare to cover expenses as if the physicians themselves owned and operated the facility, even though they would not.
The proposed rule thereby exposes hospitals to compliance risks while providing very little opportunity to rectify arrangements rendered suspect by the rule. To the extent that a hospital continues to pay overhead costs for a non-excepted HOPD, it could be perceived as offering free services and supplies to community physicians who provide services at the HOPD. It is axiomatic under federal fraud and abuse laws that hospitals not provide free goods or services to referring physicians. Assuming there are referrals to the hospital from community physicians who perform services at the HOPD, Stark Law and/or Anti-Kickback Statute prohibitions may be triggered.
The proposed rule’s effective date of January 1, 2017, further exacerbates compliance concerns, forcing hospitals to make extensive changes to existing HOPD clinical care arrangements within an abbreviated time frame. Such abrupt changes to existing agreements may cause the modified agreements to fall outside numerous Stark Law exceptions and Anti-Kickback Statute safe harbors, which require that compensation terms be “set in advance” for the duration of the arrangement between the parties. The “set in advance” condition has been interpreted by CMS to require that the terms of physician compensation remain fixed for at least one year following the consummation of an agreement or amendment thereto.
The concern raised by the AHA may be mitigated if the physicians performing services at the HOPD are employees or independent contractors of the hospital (or an affiliated entity) and assign their Medicare collections to the hospital entity. However, any arrangement in which a physician collects payments directly from Medicare for services performed at an HOPD impacted by the site-neutral payment policy could be viewed as suspect if the arrangement fails to require the physician to reimburse the hospital for HOPD-associated expenses.
AHA is calling on CMS to forgo finalization of the proposed rule because it would require “impacted hospitals to accept significant compliance risk” and to “delay the implementation of the site-neutral policies in the proposed rule by at least one year.” AHA claims that “[t]his delay would provide the time necessary for CMS to develop a fair and flexible payment policy under which hospitals would be able to receive direct payment for...their non-excepted HOPDs and for non-excepted items and services that they furnish in excepted HOPDs.”
McCarter & English will continue monitoring this development for its potential to affect our clients.
