Christopher P. Kenny, Partner, King & Spalding LLP, and Christina A. Hughes, Counsel, Powers Pyles Sutter & Verville PC, discuss some of the key issues related to provider-based status. They cover challenges related to the public awareness, notice of co-insurance, and distance requirements; and the difference between billing something as “provider-based” versus "under arrangement." Christopher and Christina spoke about this topic at AHLA’s 2024 Institute on Medicare and Medicaid Payment Issues in Baltimore, MD.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Christopher P. Kenny, Partner, King & Spalding LLP, and Christina A. Hughes, Counsel, Powers Pyles Sutter & Verville PC, discuss some of the key issues related to provider-based status. They cover challenges related to the public awareness, notice of co-insurance, and distance requirements; and the difference between billing something as “provider-based” versus "under arrangement." Christopher and Christina spoke about this topic at AHLA’s 2024 Institute on Medicare and Medicaid Payment Issues in Baltimore, MD.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
<silence>
Speaker 2:This episode of A HLA speaking of health law is brought to you by A HLA members and donors like you. For more information, visit american health law.org.
Speaker 3:All right , well, welcome everyone to this podcast. Uh , my name is Chris Kenny . I'm a partner at King and Spalding in Washington DC , and I am joined by,
Speaker 4:Hi, this is Christina Hughes . I'm counsel with Powers Pile , Sutter in Burville, also in Washington, dc . Um, and we're gonna be talking about provider-based status. We had talked about this in a couple of sessions at the March , um, Medicare and Medicaid Institute in Baltimore for A HLA, and they graciously invited us to , uh, talk about it today on this podcast. And so, jumping right in , uh, Chris, what are the, the key things to understand, do you think about provider-based status?
Speaker 3:I'd say that the question I get repeatedly, and it's not a surprise given how provider-based status has changed, evolved, or the , or the, or the landscape around it, I guess, has changed is why does it even matter anymore? Right. Historically, hospitals were very interested in either starting , uh, were acquiring through , um, physician practice acquisitions, new off campus , particularly off campus outpatient departments. And the reason for that, I think, was twofold. Um, the first was that , um, hospitals, particularly urban hospitals, but even suburban hospitals, were running outta space to actually provide the full suite of care that they were , um, providing on their main hospital campus. They wanted to add more inpatient beds , um, other ancillary services that required coming to the main hospital facility and the outpatient suite of services they might otherwise offer. Um, just couldn't really be accommodated anymore. And in fact, patients , uh, so, so you had this one force where hospitals are running outta space, but on the other, this other force patients didn't really like coming to the hospital that much. Again, if you're in an urban area or a high traffic suburban area, you know, patients would much rather see a doctor and get outpatient services closer to where they live, and not having to drive into the main hospital campus and wade through all of the, you know, congestion and, and backup that can come with, with going through a full acute care hospital. So some of it was just practical. And then some of it obviously was financial. You know, hospital, particularly on the acquisition side, hospital services are paid at a higher outpatient PPS rate than what a similar service would be paid under the Medicare physician fee schedule. There's two bills. There's the hospital bill and there's the, the professional fee. Um, so even though a lot of patients were responsible for two co-insurance obligations, it still made financial sense for providers to start these facilities , uh, because it was , um, an opportunity to get a higher rate on the service you're providing. Well, that leads to the question that clients ask , why does this matter anymore if as this happened in the last several years, the rates have become more or less equal at new off-campus facilities , um, between the physician fee schedule rate and the outpatient PPS rate, that financial incentive isn't quite there. So why are we bothering with this? And I think the reason that I continue to see providers interested in pursuing , um, hospital outpatient department builds or strategies, number one, the first one I mentioned, the space and practicality issues are still there. pe you know , people are no more eager to drive into the main hospital to get outpatient services than they were 10 years ago. Um, but also there's a huge emphasis on acquiring three 40 B benefits at these facilities. And even if the payment rate for services that you're providing in an off-campus site aren't any better than what they'd be at a physician office site, the reason to operate these facilities, this hospital outpatient department, which is still just as costly as it was before the reimbursement rates change , is because if you qualify as a child site, you can include this facility on the cost report as a, as a reimbursable cost center, part of a reimbursable cost center, then it can qualify for three 40 B. And the savings that are achieved on those drugs are really significant. And that makes sense when you think about it, right? What is the one service a patient does not want to drive and have a lot of inconvenience to go get? Well, if you're a cancer patient, for instance, right? It's a lot easier to go to an off-campus oncology site that's a lot more customer friendly, a lot more patient friendly, closer to where you are, puts a lot less burden on the patient. And guess what? Those are the most expensive drugs by and large to buy. And so getting three 40 b savings on those drugs is really, really important. So that's why I think provider base still matters. Um, it's kind of the key consideration I see clients make when they're deciding if they want to continue operating or continue increasing their number of , of provider based facilities that they operate. And I don't really, with all, despite all the controversy on three 40 B , which is a whole nother topic , uh, and podcast , um, I don't see that abating anytime soon.
Speaker 4:That makes a lot of sense,
Speaker 3:<laugh> . So, so if you are listening to this podcast, surely that is a consideration you are making yourself or are hearing from clients as well. Um, you know, we talked at our presentation, which we're not gonna <laugh> , uh, regurgitate here on a lot of the big pitfalls and risks that hospitals that decide to continue operating these types of facilities encounter. One that you talked a lot about that I think is worth getting into more detail here , uh, are issues around, so-called public awareness. So I wonder if you wanna maybe spend a minute, Christina , explaining what that requirement is, how people can go wrong, <laugh> trying to comply with it. Yeah . And what are the right ways to go about trying to remain in compliance?
Speaker 4:Sure. Um, so as you mentioned, there's a variety of requirements for the hospital outpatient departments to meet in order to qualify or provider based status. And one of the elements of that is this public awareness requirement. And essentially the outpatient department has to be held out as part of the provider to the public and to third parties in order to qualify. Now, what does that mean when you're on campus? It's a lot easier. Let , let's just be honest. You're, you're right there with the hospital. Uh, you've got all the hospital signage everywhere. You're probably in a building with the hospital's name on it. You may just be, you know, a suite, but when you're off campus, this becomes much more difficult. Um, if you're in a freestanding building, you're gonna be talking about your own signage , um, and you're gonna have control over that, which is good. Um, but, and then there's different issues when you're in a medical office building or some other type of setting , uh, because you may not have the ability to have external signage in the same way. So let's first take the first example. Essentially you have your own building. You're out in the suburbs, you get surrounded by a parking lot. The requirement is that the patient, when they come to your facility before they go into the building, they have to know that they are entering the hospital. Um, they shouldn't, it shouldn't be, you know, a clinic name. It shouldn't be a physician name on the door. It should be the hospital's name on the door, and then in smaller letters or, you know, however you wanted , denote it. If you wanna make clear that it's an outpatient department and affiliated a little differently than the inpatient hospital, you can, but it's, it's part of the notice to the patients that they're going to be getting a hospital bill to get this public awareness out there. Um, and it's also important to know that it has, has to be the name of the hospital, not the name of the system. And we had some questions come up in the presentation, Chris, as you may remember, about , um, doing business as names. Mm-Hmm, <affirmative> . And you know, where you have a name that you're holding out to the public, that's the name that should be on these buildings. Um, because you know, your average patient probably doesn't understand the difference between the doing business as name and the legal name of the entity. So whatever name they're most familiar with is what you need to do in order to adequately inform them that they're entering the hospital. Um, when it comes to, you know, the signage, if you're in one of these suburban office complexes, the sign that en at the driveway, that should also be noted with the name of a hospital. Um, but do you have to have a sign, you know, on the freeway that points to you that says, this is the hospital? No. Um, you know, we have to understand that patients also need to know that they're going where they're going, which is the outpatient department and not the main hospital. So there's a fine line to walk there so that you aren't confusing patients about the fact that they're gonna get two bills, but also confusing the patients about where they're going and the services that they're trying to access. Um, when you're going into the medical office building setting, again, you may not be able to have that name broadly broadcast on the side of the building or on signage outside of the building. But when the patient comes into the building, there's gonna be a directory almost certainly, and that directory cannot omit the name of the hospital, that that's sort of the first marker to the patient, that they are going to be entering a hospital facility. Um, and then the sign on the outside of the suite, again, should have the name of the hospital. I've seen that with a number of clients where the directory is right, but then they get to the office door and the office door, you know, maybe it was an acquisition later on in the process and was converted to a provider based status. And the sign on the door still says the name of the physician practice that was acquired to become a provider based status. Um, that's gonna be a problem. And the accreditors and the site visit , um, CERs are going to pick up on that, and you're gonna get dinged for that. So that's something to be very , uh, aware of. Um, that said, there are other situations where <laugh> , it's very interesting. Um, there was a Cleveland Clinic case that came before the PRRB . Um, it was a sleep center located in a hotel, and the hotel didn't have the signage outside for the sleep center. Um, there wasn't anything when you went into the hotel lobby even , um, people would go in, they'd ask, they'd be directed to this sort of isolated area of the hotel. And there in that separate space was the finally the name of the hospital. And that was deemed to be sufficient , um, because it was clearly marked outside the actual physical space. Um, so there , you know, it was a fine case. Cleveland Clinic was probably walking a finer line than they probably should have been, but nonetheless, it , it was found to meet the public awareness standard. Um, so just, you know, people who are going down this road just really need to be aware of that. And that is one of the ways I see people get tripped up time and time again when it comes to provider based status. Um, Chris, what are other ways that you see , um, clients or , um, entities that you're aware of kind of trip over the pro the, the barriers for provider based status?
Speaker 3:You know, I think that there's two that I've seen , uh, in the last several years. One of them I think is related to provider, or excuse me, to public awareness. And that is the notice of co-insurance requirements. So , um, I think everyone listening to this probably knows the rule, but for the sake of level setting, if a hospital operates an off-campus provider-based department, it is the hospital is required to provide Medicare patients. Not all patients, but Medicare patients with a notice like a either, you know, once upon a time they're all in paper. I suppose now they're at kiosks or iPads or whatever , uh, an electronic notice. But a notice in writing that the patient is being seen in a hospital department, patient's going to get two bills, which includes service, the hospital service hospital bill that they would not otherwise get if they were being seen in a physician's office. And this is the really critical one, an estimate of what the patient's financial responsibility is gonna be , um, for having been seen in that department. And I think, you know, that last requirement can be pretty tricky because, you know, lots of hospitals don't know, actually, most hospitals don't know at any given encounter what the patient's out-of-pocket or other financial responsibility is going to be because they don't know, number one, what services the patient is gonna get necessarily. Some, you can kind of , it's pretty easy, but a lot aren't. You come in complaining of back pain and it could be you get an X-ray and there's a compressed disc , or you know, God forbid, you know, it's cancer and there's all sorts of other, you know, diagnostics that are being. Um, so the idea that a hospital could predict upfront exactly what type of service the patient's gonna get and therefore estimate what the liability's gonna be is , is virtually impossible. But what makes it even harder is that even if you know the , uh, services that they're scheduled to get, it's hard to know what their benefit package and coverage for those services might be. So even for Medicare patients, you may have a patient who has a Medicare advantage and every Medicare Advantage contract is gonna have different provisions for cost sharing. They might, if they're fee for service , they might have a supplemental. Well, how much of the out-of-pocket expense is the supplemental gonna cover or not? Um, is there any sort of deductible type , uh, you know, requirement that the patient's gotta meet where they're on the hook for some fixed amount up until a limit and then the insurance kicks in after that. It's really hard to know any of that upfront , rather , uh, rather than waiting until you actually start processing the claim. So providers will say, well, if I don't, if I, if I'm faced with all these variables and all this uncertainty, how am I supposed to give an estimate the Medicare rule and certainly the , those who are responsible for enforcing the Medicare rule say, come up with something, an estimate's an estimate. So look at typical charges , um, what are the typical services that are provided in this setting? And give them an estimate of what that could be. And you can caveat that estimate , um, so that it says it's gonna vary based on your benefits. It's gonna vary based on what services you get, what the physician thinks is medically necessary and so on. But at least have a dollar figure that is somewhat representative of the services that are provided in that clinic. And then an obligation, an ongoing obligation to refresh that periodically. I think once a year is a good, good rule of thumb. Um, you know, there have been, there's been a very large false Claims Act case settled in the last five years where a provider was furnishing those notices but did not include an estimate with those notices. And the Department of Justice thought that that was a deliberate attempt to avoid or to mask the impact of converting freestanding physician offices to provider-based status, the additional co-insurance amount. They didn't want patients to sort of put the, you know, put the math together and realize what that meant in pocketbook terms. So it's a very high risk area. It, it warrants continued vigilance and it's one that , um, yes , I've seen go south , um, in, in probably the worst imaginable imaginable way. The second one, I don't know that it's a problem or a trip up or anything, but I think it's worth repeating. Um, 'cause it relates to three 40 B is the question of distance, right ? Generally speaking, a provider based facility, if it's off campus , has to be within 35 miles of the main hospital campus. There are a couple of exceptions or they're not really exceptions, they're just different ways you can meet the location requirement. The 35 mile rule is the first one is the most straightforward, it's the most objective. Um, and it's the most common. There is another provision that is just a carbon copy of the language that's in the three 40 B statute , um, where a high dish hospital has an agreement with a state or local government to provide services to low income patients who are not Medicare or Medicaid in a quote , well-defined service area. And I've seen a lot of proposals to use that exception to put provider-based departments on the moon <laugh> . Again , uh, I am a little, I'm not saying you can't use that req uh, provision to meet the, the , um, the distance requirements, therefore a reason it is the law. But I think that if providers say, well, gosh, I wanna build a clinic or acquire a clinic, it's 40 miles away, not 35 miles away, can I do it? 'cause we're a high dish hospital? I'd say, well, let's like be really, really careful about what we're doing here. What is the well-defined service area? If you just have an agreement with like the state of California or the state of Virginia that says, okay, we're gonna provide care to low income patients. Well where in California, where in Virginia, I mean is , is how well defined is just the state. It's not, seems to me pretty vague. Um, number one. Number two, are you providing care to those low income patients contemplated in the statute? And that part of the rule in the clinic, you're hoping to build 45 miles away from your hospital. It's not an express requirement in the rule, but I think it's pretty good practice to try to do that so that it shows that this well-defined service area that you're providing care in, right? That's the reason you need to be provider based so that you can qualify for three 40 b, get the discounts that the statute says is intended to offer services to low income patients. Right? That's what those savings are for. Think it feeds into this narrative right or wrong, that providers are using the three 40 B program to just increase their margins and not actually expand the care they offer to, to vulnerable patients. So I would just offer a note of caution to hospitals that are considering proposals from consultants or others , um, that view this as a big opportunity to expand your off-campus locations , uh, far and wide. Doesn't mean you can't do it, but be very deliberate about where you're doing it and why you're doing it.
Speaker 4:That's a good point. Um, and I remember something that came up during the sessions was the question of whether you could have one outpatient department 35 miles away and then another half outpatient department 35 miles away from that first one. And we were, we had to clarify that no, you , you're provider based to the main campus and so that's, that's where you need to be 35 miles from. So just
Speaker 3:Right. This is not an island chain, like the Philippines of provider based departments that just keeps jumping from one to the next. I
Speaker 4:Don't think exactly. <laugh> .
Speaker 3:Um, well I've got one last question 'cause it came up in our session and I think it's worth talking about, and it's kind of in this sort of why and what category, you know, what is the difference between billing something as quote provider based and a hospital billing a similar service maybe in the same service, quote unquote under arrangements. Christina , what's the difference between the two and how do they interact in the, in the, in the rule, the provider race rule itself?
Speaker 4:Sure. Um, so when you're talking about under arrangements and you're talking about on campus outpatient departments, there's really no difference. You're, you're talking about a hospital that has contracted with an outside entity to provide some set of services or core services that the hospital either needs to provide or chooses to provide. Um, and you know, the, the under arrangement entity doesn't bill for those services, the hospital bills for those services, they're essentially the hospital services . They're where the buck stops in those types of arrangements. They just have an outside contractor. It's a little different when you get to the off-campus provider-based entities. Um, they can still use under arrangement situations, but they cannot merely be a billing mechanism at , at that point. Um, they have to perform exer , sorry, they have to perform professional responsibility over the arranged for services. So again, the provider based entity and then of course the main campus of the hospital are going to be responsible for the services provided. Um, but also CMS has indicated that they, they want the under arrangements arrangements, if you will , um, at outpatient departments that are off campus to be used as a supplement to the range of services otherwise available. They don't want outpatient departments to be contracting with third party entities to provide essentially all of the services available in that outpatient department. Um, they want , um, it to be sort of specialized healthcare services that the outpatient department does not itself offer. Um, and that's an important language, I think because when you're talking about an outpatient department that's provider based , they theoretically have access to all the same services that are available at the main campus. Therefore, if there's a service that's being provided at the main campus that should , that they wanna make available at the outpatient department, and that main campus is providing it in-house essentially, then that same service should be likely provided in-house or through the main campus at the outpatient department as well. Um, that is the type of specialized healthcare service that CMS doesn't want you contracting out at that point , um, for a variety of reasons. And it , when you're looking at that situation, it's not just the provider based status rules that are in question, but you may actually be getting into anti-kickback and Stark Law rules because you are giving the third party an opportunity to bill. Again, we're not gonna go down that rabbit hole. Um, just know that it is very important to be very careful about what you are hiring third parties to do in an outpatient setting. Um, one of the most critical things to remember is that all patient care services furnished at an outpatient department that's provider based must , uh, be furnished by employees of the main of the hospital. They may not be furnished under arrangement. Um, the exception of course being physician services, the physicians bill for their own services. You're not billing for those. So the physicians don't have to be employees, but the nursing staff, the lab tech, the radiate radiology tech , um, all of those personnel need to be employees. You can't be contracting out for the , that type of personnel in an outpatient hospital department that's off campus. Um, and you know, and even when you could contract out for those things at the hospital, you know, you can hire traveling nurses at the hospital on a contract basis through a , an agency, but you can't then send those traveling nurses out to your hospital outpatient departments that are off campus . Um, and I think that's, especially in this , the day and age of the extreme nursing shortages, that's an important distinction to understand . Um, Chris , anything else we should touch on?
Speaker 3:You know, I think we've hit the highlights here. Um, you know , I think this kind of covers some of the more talked about topics that we , uh, we addressed. Um, but I, I think that, I think that does it
Speaker 4:Well. Um, we thank a HLA give for giving us the opportunity to talk about this issue. And , uh, we thank you for tuning in and we hope everything goes well in your practice and you don't have to come to either of us to talk about these in more depth.
Speaker 2:Thank you for listening. If you enjoyed this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.