AHA asks for delay in ‘site-neutral’ payment proposal from CMS

The proposed rule to stop reimbursing off-campus facilities at the same rate as outpatient units based within hospitals could lead to facilities violating physician self-referral laws, according to the American Hospital Association (AHA).

Released in July, the proposed rule would change the classification of off-campus departments which opened or changed service lines in the past 10 months. They would instead be considered physician-owned clinics, but hospitals would remain responsible for the costs of operating these facilities.

The AHA commissioned a legal analysis by Hogan Lovells, who said the proposed rule would push hospitals toward arrangements that are in violation of anti-kickback statutes and the physician self-referral law, known as the Stark law.

“Were CMS to adopt the proposed rule, hospitals and treating physicians would be forced to choose between the substantial legal risk of entering into altered financial arrangements subject to scrutiny as well as potentially significant financial and criminal penalties under the fraud and abuse laws, on the one hand, or disrupting the delivery of patient care on the other,” Lovells wrote.

Going as far as to call it a “set-up” for fraud and abuse charges, Lovells and the AHA said under the proposed rule, hospitals would likely violate laws against providing free benefits to referring physicians.

“Normally, Medicare pays physicians at a lower “facility rate” when they practice at (hospital outpatient departments, or HOPDs), because the hospital pays and receives reimbursement for the overhead expenses of providing the service—the building, equipment, non-physician clinical staff, medical supplies, patient health records, air conditioning, bed sheets and the like,” Lovells wrote. “As long as hospitals continue to operate HOPDs, the proposed rule does not change the fact that the hospitals will remain financially responsible for these costs of providing care. Thus, under CMS’s proposal, hospitals would provide physicians the completely free benefit of reimbursement for HOPD services for which they paid nothing.”

To avoid these potential conflicts, the AHA asked CMS to delay the rule’s implementation until at least 2018.

CMS has estimated the site-neutral changes would save about $500 million a year in Medicare spending.