New PPS system carries requalification clause
Changes required by new PPS system
Medicare’s new prospective payment system for hospital outpatients may require some physicians to be recertified by the Health Care Financing Administration (HCFA).
Physicians considered to be off-campus and some on-site physician practices that are owned by a hospital must be recertified by HCFA to ensure they meet the agency’s new qualifications before being reimbursed by Medicare. This new requalification rule goes into effect Oct. 7. The new prospective payment system is expected to go into effect in July.
Some facilities and organizations that currently comply may find it hard — or impossible — to qualify for Medicare payments under the new arrangement. HCFA argues that it needs to implement these new standards to avoid several problems, including the following:
— inappropriate reimbursement;
— unwarranted Medicare coinsurance payments for facility services;
— inadequate physician supervision of hospital outpatient department services rendered incident to physician services;
— inadvertently certifying off-campus outpatient facilities not meeting health and safety requirements.
According to an analysis by the Medical Group Management Association of Englewood, CO, to qualify for provider-based status under the new rule, health systems need to show there is a relationship between a main provider and one of the following four categories of subordinate facilities:
1. Provider-based entities: an entity, including a rural health clinic or a federally qualified health center, that is created or acquired by a main provider to furnish health services different from the services furnished by the main provider under the name, ownership, and control of the main provider and may be licensed or certified to provide health services in its own right.
2. Department of a provider: a facility, organization, or physician office that is created or acquired by the main provider to furnish the same type of services provided by the main provider under the name, ownership, and control of the main provider. A department of a provider may not be separately licensed or Medicare-certified, but only operated as part of the main provider.
3. Remote location of a hospital: a facility or organization that is created or acquired by a main hospital to furnish inpatient hospital services under the name, ownership, and control of the main hospital and is not separately licensed or certified as a hospital.
4. Satellite facilities: a part of a hospital (or of a hospital unit) that provides services in a building used by another hospital or on the same campus as a building used by another hospital.
Under the final rule, a "campus" is the physical area located within 250 yards of the main provider’s main buildings and any other area determined by the HCFA regional office on an individual basis to be part of the main provider’s campus.
To qualify for provider-based status, you must prove to HCFA the subordinate facility is an integral and subordinate part of the main provider, operated under the name, ownership, and administrative, clinical, and financial control of the main provider. To do this, the providers need to pass the following seven tests:
o Licensure.
The department of the provider, remote location of the hospital, or satellite facility and the main provider are operated under the same license, except in areas where the state requires a separate license or in states where state law does not permit licensure under a single license. If a state health facilities’ cost review commission (or other rate-setting agency) finds that a particular facility or organization is not part of a provider, HCFA will determine that the facility or organization does not have provider-based status.
o Ownership and control by the main provider.
The facility or organization seeking provider-based status must be operated under the ownership and control of the main provider. The following requirements must be met:
— The business enterprise that constitutes the facility or organization must be 100% owned by the main provider.
— The main provider and the facility or organization seeking status as a department of the provider, remote location, or satellite facility must have the same governing body.
— The facility or organization must be operated under the same organizational documents as the main provider.
— The main provider must have the final responsibility for administrative decisions, final approval for contracts with outside parties, final approval for personnel actions, final responsibility for personnel policies (such as fringe benefits/code of conduct), and final approval for medical staff appointments in the facility or organization.
o Administrative integration and supervision.
The reporting relationship between the main provider and subordinate facility must have the same frequency, intensity, and level of accountability that exists between the main provider and one of its departments.
The individual responsible for the day-to-day operations of the subordinate facility must maintain the same reporting relationship with, and accountability to, the management and governing board of the main provider as maintained by any department head of the main provider. The administrative functions of the main provider and subordinate facility, such as billing, records, payroll, human resources, and purchasing, must be integrated.
The final rule allows the outsourcing of a subordinate facility’s administrative functions as long as the main provider manages the contract if the subordinate facility is operated under a management contract.
o Clinical integration and supervision.
The clinical functions of the subordinate facility must be integrated with those of the main provider, as evidenced by common credentialing, common clinical oversight, a standard relationship of reporting, supervision, and accountability between the medical director of the subordinate facility and the main provider’s chief medical officer, common medical or professional staff responsibility for quality assurance and utilization review functions, a unified medical record retrieval (or cross-reference) system, and patient access to the main provider.
o Financial integration.
The financial operations of the facility or organization must be fully integrated within the financial system of the main provider, as evidenced by shared income and expenses between the main provider and the facility or organization. The costs of the facility or organization are reported in a cost center of the main provider, and the financial status of the facility or organization is incorporated and readily identified in the main provider’s trial balance.
o Public awareness.
The facility or organization seeking status as a department of a provider, remote location, or satellite facility is held out to the public and other payers as part of the main provider. When patients enter the provider-based facility or organization, they are aware that they are entering the main provider and are billed accordingly.
o Same patient population.
The subordinate facility must either be located on the campus of the main provider or satisfy one of three tests intended to demonstrate that the facility serves the same patient population as the main provider.
The first two tests require the main provider to submit records showing that for the 12-month period immediately preceding the calendar month in which the provider-based application is filed, and for each subsequent 12-month period, at least 75% of the patients served by the subordinate facility resided in the same zip code areas as at least 75% of the patients served by the main provider; or at least 75% of the patients served by the subordinate facility who require the type of care furnished by the main provider — inpatient hospital services — obtained that care from the main provider.
If neither of those tests applies to the subordinate facility because it was not in operation during all of the applicable 12-month period, the facility can submit records showing that it is located in a zip code area included among those that, during the applicable 12-month period, accounted for at least 75% of the patients served by the main provider.
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