Provider-Based Arrangements



On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015 (“Act”).  Among the numerous changes approved, the Act includes the imminent exclusion of hospital coverage for off-campus hospital outpatient departments that first bill for services on or after November 2, 2015.  Despite the fact that CMS and MedPac have had this issue on the table for some time, the implementation had always been just beyond the horizon.  This time, the Act was passed swiftly through Congress and was signed just as quick.  The speed with which this was passed yields more questions than answers at this time for many hospitals and hospital systems.

The Act excludes from Medicare’s hospital outpatient prospective payment system (“OPPS”) any services (except for items and services furnished by a dedicated emergency department) furnished at an off-campus outpatient department of a hospital beginning January 1, 2017.  Quite simply, this means that if you were not billing under OPPS for an off-campus location as of November 1, 2015, you will continue to be paid under OPPS during 2016.  However, effective January 1, 2017, services at these locations will be paid under another reimbursement system.  This “other system” will likely include one or both of the Medicare Physician Fee Schedule (MPFS) and the Ambulatory Surgery Center payment system (ASC-PS).  Either of these systems represents a significant reduction in reimbursement.  The Act has also created a grandfathered status for those off campus departments of a hospital billing hospital services under OPPS as of November 1, 2015.

Despite the changes brought about by this law to the payment for services at an off-campus provider-based location of a hospital, there were no changes made to the provider-based regulations themselves.  The regulations governing provider-based status in 42 C.F.R. §413.65 have remained unchanged for some time.  The changes have come in the scrutiny and enforcement of these regulations by CMS and the OIG, in particular the exclusive use requirement.  Some of these reviews have resulted in the termination of provider-based status and significant repayments.

This Act change brings the requisite change to the billing of claims in a provider-based setting.  Effective January 1, 2016, hospitals and physicians are required to report a modifier (“PO”) for services furnished in an off-campus provider-based location.  The following CMS 1500 place of service (POS) codes will also need to be used: 1) POS 19-Off Campus Outpatient Hospital and 2) POS 22-On Campus Outpatient Hospital.

As noted above, the details of the implementation of this change in the law have not been worked out at this time.  This Act will have an impact greater that the black/white changes specifically made in the Act.  What do all of these changes mean to you at this time?  Although not an all-inclusive list of Q&As, here are a few items to take away.

  • Critical Access Hospitals –  The Act governs coverage and payments under OPPS.  However, CAHs must continue to meet the increased scrutiny of provider-based regulations and enforcement.
  • Rural Health Clinics –  Provider-based RHCs are separately enrolled in the Medicare program.  Moreover, RHCs are not off-campus “departments of a hospital”, but rather are “provider-based entities”.
  • Facilites under Development –  Letter of the law would suggest that if you were not billing as an off-campus department of a hospital on November 1, 2015, you would not qualify for grandfathered status.  In the past, CMS has extended a grandfathered status for those facilities under development at the time a law is changed.  However, at this time there has been no indication that this will be the case.
  • New Services-Moving or Adding –  Can new services be moved or added to an existing off-campus location?  CMS will need to clarify whether a grandfathered facility can move to a new location or add new services to a current location and maintain its grandfathered status.
  • Documentation –  Review the documentation you have for existing off-campus sites to verify they qualify as grandfathered sites.  Were services billed as OPPS services as of November 1, 2015?  Were these locations listed on the CMS 855A as hospital locations?

There are significant changes and implementation issues to be address by CMS in this process.  Stay tuned to further guidance.  We can help shape this implementation.





Kirk Delperdang is a Healthcare Director at Lutz with over 28 years of experience. He provides healthcare enrollment services to clients with a focus on Medicare providers and reimbursement analyses. In addition, he is responsible for leading Lutz's cost report service line.

  • Healthcare Financial Management Association - Nebraska Chapter, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
  • BA in Accounting, University of Northern Iowa, Cedar Falls, IA
  • St. Vincent de Paul, Knights of Columbus, Member
  • Active in various youth sports leagues: Aldrich Elementary, Millard Athletic Association, Millard North Schools, Omaha FC, Skutt Catholic High School and YMCA


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