AHA Asks CMS to Rescind Site-Neutral Payment Exception Denials

March 30, 2021 - The American Hospital Association (AHA) is calling on CMS to rescind recent audit determinations that lowered Medicare reimbursement to site-neutral payment rates for certain off-campus provider-based departments per the 21st Century Cures Act.

The 21st Century Cures Act—which will be implementing new information blocking rules next week after a delay—authorized CMS to deny a mid-build exception request from hospitals seeking to avoid lower site-neutral payment rates if the agency completed its audit of the hospital by Dec. 31, 2018.

Earlier this month, CMS notified hospitals via email that it had completed all audit activities in accordance with the law.

But the AHA is now saying that CMS is too late with completing audit activities authorized by the law and, as a result, the mid-build exception denials “inappropriately reduced payment rates for items and services furnished by certain off-campus provider-based departments (PBDs) that first billed Medicare for services furnished on or after Nov. 2, 2015.”

“And, the issuance of these denials could not have come at a worse time for hospitals that are struggling both financially and with staff and resource shortages due to the pandemic,” the hospital group added in a March 25th letter to Acting CMS Administrator Elizabeth Richter.

AHA is asking CMS to exclude hospitals that submitted mid-build exception requests from the definition of “off-campus outpatient department of a provider” in all instances where CMS failed to timely deliver a contrary determination as part of the audit completed on or before the Cures Act’s Dec. 31, 2018 deadline.

Per the Bipartisan Budget Act of 2015, Medicare has not reimbursed hospitals under the Outpatient Prospective Payment System (OPPS) since 2017 for items and serviced furnished by off-campus provider-based departments (PBDs) that first billed Medicare on or after Nov. 5, 2015. Instead, these PBDs are subject to a rate 40 percent of the OPPS rate and more in line with the Medicare Physician Fee Schedule rate for the same service.

However, some off-campus PBDs are excepted from the lower site-neutral payment rates per federal law. The “grandfathered” PBDs include those that were billing Medicare prior to Nov. 5, 2015, and those that were under construction by that date but had not started billing Medicare yet.

For the latter, the Cures Act allowed hospitals to apply for a mid-build exception to the site-neutral payment policy by Feb. 13, 2017.

CMS was to then audit hospital requests and related materials for compliance and a determination.

The agency released results from the audit in a fact sheet on Jan. 19, 2021. The fact sheet indicated that the COVID-19 public health emergency delayed release of the audit determination letters.

CMS also announced in the fact sheet that most mid-build exception requests were denied.

Specifically, of the 334 hospitals that requested a mid-build exception for their off-campus PBDs, 132 qualified 202 did not.

Additionally, hospitals denied the mid-build exception have likely received overpayments from Medicare and will have 240 dates to address the overpayments, CMS stated in the fact sheet.

AHA also questioned audit results in its letter to CMS, arguing that many of the mid-build exception denials are “simply incorrect.”

The hospital group blamed incorrect denials on Medicare Administrative Contractor misunderstandings of the information submitted and their interpretation of what the Cures Act requires. For example, some hospitals said that they failed the audit because its “parent” health system had the contract for construction of the PBD even though the hospital actually owned the property.

Additionally, some hospitals told AHA that CMS failed them because their CEO or COO did not sign the mid-build attestation even though their organization does not have those positions.

The site-neutral payments act as a control for hospital-based outpatient care growth among Medicare beneficiaries, which CMS has said increased program spending significantly even though some of the services could be safely performed in the less expensive physician office setting.

Hospital groups have decried the payments, contending that off-campus PBDs should continue to get reimbursed the higher OPPS rates because they are subject to different policies and regulations and treat sicker, poorer patients.

AHA and several other groups, however, recently lost their legal challenge of the policy.