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On November 1, CMS’ final rule regarding provider-based locations relaxed restrictions from its original proposal in July 2016.  The 2017 Medicare Outpatient Prospective Payment System (OPPS) final rule implements certain elements of Section 603 of the Bipartisan Budget Act of 2015 (BBA).

The final rule modifies reimbursement for off-campus hospital provider-based departments (HOPDs) that were established or acquired on or after November 2, 2015 – the date of the BBA’s enactment (i.e., non-excepted off-campus HOPDs).  However, the final rule confirms that off-campus HOPDs established prior to that date are excepted or “grandfathered” under the rule and may continue to bill for services under the OPPS. The final rule also did not impact on-campus HOPDs or HOPDs within 250 yards of a remote inpatient location.

The final rule most importantly:

  • Increases flexibility for excepted/grandfathered off-campus HOPDs by allowing service expansions without limitation and facility relocations in extraordinary circumstances.
  • Establishes a new reimbursement methodology for non-excepted HOPDs, which has significant impact on operational decision-making and may result in favorable reimbursement as compared to freestanding locations, pending services provided.
  • Confirms that eligibility for 340B Program participation at off-campus HOPDs will likely remain the same because non-excepted HOPDs will likely be listed as reimbursable cost centers on hospitals’ Medicare Cost Reports.
  • Confirms hospital-owned freestanding emergency departments may provide both emergency and non-emergency services, so long as EMTALA requirements are met, and bill under the OPPS.

Murer describes the final rule in two parts – separating the provisions which affect excepted HOPDs from those that affect newly established or acquired locations.

Final Rules Affecting Excepted Off-campus HOPDs

The final rule increases flexibility for excepted HOPDs in the following manner:

  • CMS did not finalize the proposal to limit service expansion under the “clinical families” tests.  Rather, CMS will allow expansion or modification of services to meet changing patient and community needs without penalty.
  • CMS will allow facility relocations for “extraordinary circumstances” outside of hospital control, such as natural disasters.  CMS cautions relocation approvals will be “both limited and rare.”

However, CMS did finalize the proposal barring excepted off-campus HOPDs from otherwise relocating or expanding existing physical space.  CMS states these facilities are limited to the physical address listed on the hospital Medicare 855A enrollment record as of November 1, 2015.

CMS is also not implementing new reporting requirements, yet explained hospitals must maintain “sufficient” documentation to identify grandfathered HOPDs.  CMS notes Medicare claims data may not be deemed sufficient, and emphasizes the importance of the Medicare 855A enrollment process.  The 855A enrollment record remains the primary source through which to identify grandfathered locations, and CMS states it will be issuing instructions to MACs in this regard.

Additionally, CMS addressed the lack of a “mid-build” exception in its final rule, stating it does not have authority to grant this exception prior to Congressional action.  The Helping Hospitals Improve Patient Care Act of 2016 (H.R. 5273), which contains provisions for a “mid-build” exception, remains pending before the Senate, last referred to the Committee on Finance.

For more information on the “mid-build” legislation, please see Murer’s previous posts available here


and here


CMS also finalized its proposal for changes in ownership, which requires purchasers to accept the seller’s Medicare agreement to retain grandfathered status for applicable HOPDs.

Final Rules Affecting Non-Grandfathered Off-campus HOPDs

CMS established a new reimbursement methodology for non-excepted off-campus HOPDs, which significantly impacts operational decision-making. By means of an interim final rule with comment period, CMS will allow hospitals to utilize traditional billing methodologies, albeit with changes in payment.

Practitioners will still bill the “professional” service on the CMS Form 1500 with an institutional place of service code.  Hospitals will still bill the “facility” or “technical” service on the institutional claim form (i.e., UB-04).  Payment will be made directly to both parties accordingly.

Importantly, CMS states outpatient services in non-excepted off-campus HOPDs will continue to be reported on Medicare cost reports.  Under existing HRSA policy, this means all provider-based facilities remain eligible for participation in the 340B Program as child sites.

However, hospitals must now report the new modifier “PN” on institutional claims for these facilities.  Payment to the hospital will then be made via the Medicare Physician Fee Schedule (MPFS), as opposed to the OPPS.  The MPFS payment rates will be set at 50% of the 2017 OPPS rate by CPT code.  (Note OPPS rates are increasing by 1.65% for 2017.)  CMS recognizes the limitations of this system, specifically related to bundled payment for certain hospital services, and is accepting public comments through December 31, 2016 as to whether this should continue in 2018 and beyond.

These new MPFS institutional payment rates may significantly impact reimbursement.  Certain CPT codes may receive a favorable financial impacts in the provider-based setting, while others may benefit from a freestanding designation.

Murer Consultants specializes in provider reimbursement, and is available to perform fiscal and strategic feasibility analyses to project payment under this new system based on services you provide.  Murer is also available to review your 855A enrollment record, ensuring all locations are properly identifiable to assist in preservation of grandfathered status.

Should you have any questions regarding these proposed rules or any other matter, please contact Murer Consultants at (708) 478-7030.

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