CMS Clarifies Site-Neutral Medicare Reimbursement Exceptions

January 04, 2017 - With the site-neutral Medicare reimbursement policy taking effect on Jan. 1, CMS recently released guidance on what hospital departments qualify for exemption from the rule.

The federal agency clarified expanded site-neutral payment exemption rules that will apply to new off-campus provider-based departments and those under construction.

In December 2016, the 21st Century Cures Act enacted site-neutral payment provisions for off-campus provider-based hospital outpatient departments. The site-neutral policy mandates that items and services furnished at an off-campus provider-based department no longer be billed under the outpatient Medicare reimbursement system.

Instead, the off-campus departments would be paid under the Medicare Physician Fee Schedule. The claims reimbursement rates, however, are about 50 percent of the outpatient rates.

The site-neutral Medicare reimbursement policy also contains several exceptions to the rule. For example, any off-campus provider-based hospital outpatient department that was already billing for covered outpatient provider department services performed before Nov. 2, 2015 can receive the higher outpatient Medicare reimbursement rates.

Despite some grandfathered departments, the site-neutral Medicare reimbursement policy originally stirred up controversy among hospitals that already had plans to or were building new off-campus provider-based departments.

Some healthcare stakeholders, such as the American Hospital Association (AHA), argued that the site-neutral rule exceptions should account for hospitals that already invested substantial capital into building new off-campus outpatient departments because they expected to receive higher Medicare reimbursement rates.

The AHA called on Congress to push the grandfather date from Nov. 2, 2015 to Dec. 31, 2016, or 60 days after enactment, whichever is later. The later grandfather date would account for inherently long construction project timelines.

Congress extended site-neutral Medicare reimbursement exceptions to some facilities with new or developing off-campus departments in 2017 and 2018 under the 21st Century Cures Act.

In the recent CMS guidance, the federal agency clarified that off-campus provider-based departments that were not billing for covered outpatient provider department services performed before Nov. 2, 2015 will only be exempted from site-neutral payments in 2017 if a CMS Regional Office received a provider-based attestation prior to Dec. 2, 2015.

However, the new off-campus provider-based department had to have been complete and either accepting or poising to accept patients.

“Accordingly, such departments will be paid for covered outpatient services under the Hospital Outpatient Prospective Payment System (OPPS) and should not use modifier ‘PN’ which would trigger payment under the Medicare Physician Fee Schedule (MPFS),” stated CMS. “Such departments shall continue to report the ‘PO’ modifier as appropriate.”

For 2018 site-neutral Medicare reimbursement exemption, CMS expanded the list of grandfathered facilities to some under construction.

For example, off-campus provider-based departments can meet a mid-build requirement for exemption. The mid-build clause states that hospitals with a “binding written agreement with an outside unrelated party for the actual construction of such department” from before Nov. 2, 2015 will qualify for the higher outpatient Medicare reimbursement rates.

To receive exemption, though, hospitals must submit a provider-based attestation to their Medicare Administrative Contractor by Feb. 13, 2017.

Hospitals also will have to give the Department of Health and Human Services a written certification signed by the main provider’s CEO or COO that the new department met mid-build requirements. The certification is also due by Feb. 13, 2017, but CMS noted that email submissions will be accepted.

Additionally, CMS recently clarified extraordinary circumstance relocation exceptions under the site-neutral Medicare reimbursement policy.

In the 2017 final ruling on the Medicare outpatient perspective and ambulatory surgical center payment systems, CMS stated that some off-campus provider-based departments that had to relocate (either temporarily or permanently) will still be exempted from site-neutral payments.

The federal agency will reimburse the relocated departments under outpatient Medicare reimbursement rates if the hospital demonstrates extraordinary circumstances outside of their control. The circumstances include natural disasters, major seismic building code requirements, and substantial public health and safety issues.

To apply for the relocation exception, hospitals must submit a written request to the appropriate CMS Regional Office. The offices, however, will prioritize request reviews for off-campus provider-based departments that relocated between Nov. 2, 2015 and Dec. 31, 2016.

For departments that relocated between Nov. 2, 2015 and Dec. 31, 2016, CMS also noted that hospitals should send a written relocation exception request with supporting documentation to their Regional Office via email no later than Jan. 31, 2017. Regional Office decisions will be effective as of Jan. 1, 2017.

Until the hospital receives an exception determination, providers should bill under the Medicare Physician Fee Schedule. After approval, the hospital can work with its Medicare Administrative Contractor to rebill claims under the outpatient rate.

In addition, departments that relocated on Jan. 1, 2017 or later should send a site-neutral payment exception request no later than 30 days after the extraordinary circumstance.

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