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Does Your (Micro) Hospital Meet the Standard?

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Does Your (Micro) Hospital Meet the Standard?

Does Your (Micro) Hospital Meet the New Standard?

CMS Issues Guidance on “Primarily Engaged”

On September 6, 2017, the Centers for Medicare & Medicaid Services (“CMS”) issued new guidance clarifying recent enforcement action trends surrounding the “primarily engaged” hospital standard. This new guidance may have a significant impact on your organization, given that some factors now leading to findings of non-compliance are likely widespread (i.e., more outpatient than inpatient surgeries).

This CMS guidance clarifies the requirement that a hospital be “primarily engaged” in the provision of inpatient services and delves into the factors CMS considers to make this determination – an important new detail not previously made clear and defined within written regulations or guidance. CMS does not specifically define the term “primarily engaged,” but rather merely states a hospital “generally” meets the standard when directly providing care to inpatients. CMS stated a patient is considered an inpatient if formally admitted to the hospital with the expectation of required hospital care for at least two midnights. CMS also states that hospitals are not required to have a specific inpatient-to-outpatient ratio.

In making a determination of whether or not a facility is “primarily engaged” in providing inpatient services, CMS will now consider these specific factors:

  • Average daily census; 
  • Average length of stay;
  • Number of off-campus provider-based emergency departments: Higher numbers of off-campus emergency departments indicates a hospital may not be “primarily engaged”;
  • Number of inpatient beds in relation to the size of the facility and the services offered;
  • Volume of outpatient surgical procedures to inpatient surgical procedures;
  • Volume of outpatient procedures for a “specialty” hospital (i.e., emergency or surgery); 
  • Patterns and trends in the ADC by the day of the week: For example, if the ADC consistently drops to zero on Saturdays and Sundays, this may show that the hospital may not be consistently providing inpatient care;
  • Staffing patterns: Staffing schedules should reflect support of 24/7 inpatient care versus patterns more appropriate for outpatient services; and
  • How the facility advertises itself to the community: CMS will look closely at how a hospital is holding itself out to the public – for example, whether the terms “specialty” hospital, “emergency” hospital, “clinic” or “center” are used.

Although a number of factors are listed in the guidance, CMS will evaluate each hospital as a whole. Just because a hospital fails to meet one or two factors does not necessarily mean that CMS will deny a Medicare participation application. Also, CMS states that even if a hospital has received State license approval or Medicare contractor approval, this does not mean that CMS will certify the facility as a hospital for participation in Medicare. Let it be noted that this guidance does not apply to Critical Access Hospitals (“CAHs”) or psychiatric hospitals.

Implications for Micro-Hospitals

This new guidance provides useful insight for hospitals who may be interested in or have already implemented small acute care facilities, often referred to as “micro-hospitals.” The use of micro-hospitals provide unique opportunities to fill gaps in service needs to communities that other facilities, like freestanding emergency rooms, fail to provide. They also allow hospitals to fill service gaps without engaging in the lofty and expensive development of larger hospital facilities. Despite the benefits, CMS emphasizes through its guidance that all hospitals—including micro-hospitals and specialty hospitals—must continue to be compliant with statutory and regulatory requirements.

Because micro-hospitals typically have a small number of inpatient beds, the factors CMS enumerates in its guidance may present some challenges in demonstrating that micro-hospitals “primarily engage” in providing inpatient care. On the other hand, the new guidance makes the waters a little less murky when moving forward with plans to implement micro-hospitals in your community.

Murer Consultants specializes in initial Medicare certification, and is available to assist you in planning to meet these newly published CMS standards. To read our frequently asked questions on Micro-Hospitals, click here.

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