New provider-based status rules catch hospitals
May 22, 2000 4 minutes read
New provider-based status rules catch hospitals
HCFA’s new regulation will impact the status of skilled nursing facilities and home health agencies
Hospitals that have yet to study the new provider-based designation rules published by the Health Care Financing Administration (HCFA) included in the final outpatient prospective payment system (PPS) rule should waste no more time, experts warn. Several seasoned health care attorneys say the new rules are so complex and leave so many questions unanswered that few hospitals realize what they are up against.
"A lot of hospitals do not understand, or it has not yet sunk in what the provider-based requirements mean," asserts health care attorney Steve Lipton of Davis, Wright, Tremain in Seattle. "Particularly if they have services that are off-site or they have services that are managed, I don’t think they understand what the consequences are."
"I think this is going to be a huge compliance issue," concurs Marilou King of the Washington, DC, office of McDermott, Will & Emery. "It is going to be quite a while before hospitals really get their arms around this."
The final rule requires providers to obtain an advance determination of provider-based status from HCFA before treating facilities and organizations as provider-based. It also imposes requirements that will make achieving that status much harder for some facilities to qualify. (See related story, p. 3.)
According to Larry Oday of the Washington, DC, office of Vinson Elkins, the final rule published April 7 and scheduled to be implemented July 1 formalizes many areas that HCFA has treated as policy for several years. "Suddenly, an issue that has been vexing on a hit-or-miss basis in the past suddenly becomes quite real," he asserts.
While the rule will directly impact hospital outpatient departments, Oday warns that hospital-based designations for skilled nursing facilities and home health agencies also will be affected, as well as any instance where two hospitals have merged into a single provider.
According to King, the first task facing hospitals is simply to determine which of their facilities and organizations will require the advanced determination. "Even the decision about what they apply for is going to be a difficult one, and one that is not clear under the rules," she asserts.
Oday takes a similar view. He says HCFA has made it clear that it will review all requests for provider-based status and that it can be retroactive to the date of the request only if the standards are being met on that date. "One of the great outstanding questions is all of those existing entities out there that may never have actually had a provider-based determination," he asserts. "HCFA claims it is not going to launch a witch hunt," he adds. "But it then goes on to say that if it gets other credible evidence’ it might actually launch an investigation into whether or not a particular entity is provider-based."
The by-product of those investigations will undoubtedly be recoupments by HCFA, Oday cautions. He says HCFA has identified two particular areas as inherently problematic. The first is anything that is off-campus. The other is anything that is on-campus that will increase the provider’s cost by 5% or more as reflected on the provider’s cost report.
"To me, this is a new backdoor certificate-of-need process that has never existed in the Medicare program before," he argues. "But it is very clear that that is what HCFA intends to do." Oday says any department, presumably even an inpatient department, that increases costs by 5% will now be forced to get HCFA’s approval before hospitals can bill that department.
According to King, HCFA’s use of the undefined term "facility or organization" creates significant ambiguity because it does not explain how a provider is supposed to distinguish between itself and "facilities or organizations" that require provider-based status.
Oday also warns that if a provider has never received a determination, all prior payments will be at risk for all cost-reporting periods that are subject to reopening. He says HCFA will give notice to the provider and then make adjustments as needed.
He also notes that HCFA has indicated that if providers have made a good-faith effort to hold themselves out as a provider department, they won’t have to worry about those prior periods. But "good faith" means hospitals must at least meet the licensure standards and the public awareness requirements.
Unfortunately, it also means that physicians in that provider department must have followed the site-of-service rules, he adds. "That to me is really the crucial aspect and the one that gives me the most heartburn," Oday asserts. "In essence, it means the provider is going to be at risk for something that the physician may have done unwittingly in terms of billing incorrectly."
King says the addition of any new services is also going to have to be very carefully scrutinized for whether advanced determination must be obtained for those services. She points to the "5% requirement," and argues that most hospitals have never had to think about going to Medicare when they are adding a new service. "If they get a certificate of need in their status that is applicable and they get it licensed, that is typically the extent of their planning," she explains.
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