A Chapter of the American College of Healthcare Executives September 2016
In This Issue
President's Message
Message from Your ACHE Regent
Member Spotlight
Proposed Rule on Site Neutral Payments for Off-Campus Hospital Outpatient Departments
Member Announcements
UW Executive MHA and Medical Management Programs
WSU Spokane MHPA program
ACHE: Become Board Certified in Healthcare Management
ACHE Tuition Waiver Assistance Program
Your Career & Development - JOB BANKS
DELIVERY of WSHEF Newsletter (Disclaimer)
2016 Officers and Board Members
WSHEF Sponsors
WSHEF Vision & Values
Get Involved!
Volunteer Opportunities
Host a Meet N Mingle in Your Area
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Chapter Officers

Martin Benning, FACHE

Dina O'Leary, FACHE

Immediate Past President
Karin Larson-Pollock, MD, MBA, FACHE

Lori Nomura, JD

Jim Cannon, MHA, FACHE


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Proposed Rule on Site Neutral Payments for Off-Campus Hospital Outpatient Departments
The Centers for Medicare and Medicaid Services (“CMS”) released its proposed rule on payments for services provided in off-campus hospital outpatient departments as part of the CY 2017 Outpatient Prospective Payment System Proposed Rule published on July 6, 2016.  The proposed rule implements Section 603 of the Bipartisan Budget Act of 2015 (“Section 603”), which applies new payment rules to most items and services provided in an off-campus hospital outpatient department that was not billing for such services before November 2, 2015. 

Beginning January 1, 2017, Medicare will pay for items and services provided in an off-campus hospital outpatient department under the applicable fee schedule, rather than under the outpatient prospective payment system (“OPPS”), except for items and services furnished:  (1) in a dedicated emergency department; (2) at a location that was billing as a hospital outpatient department before November 2, 2015 (“Grandfathered Facility”); or (3) on the campus of a remote location of a hospital (collectively, “Excepted Services”).  A remote location of a hospital is a separate location where inpatient services are provided.  “Campus” is defined under the existing provider-based rules to include the physical area within 250 yards of the provider’s main buildings and other areas as determined by the CMS regional offices. 

Under the proposed rule, hospitals will have very limited ability to replace or expand their existing off-campus hospital outpatient departments or to expand the scope of services provided in such facilities.  It is also unclear how hospitals will bill and receive payment for non-excepted services after January 1, 2017, and in certain cases, whether some services such as certain surgical services that are covered under OPPS but not under the ASC fee schedule, will be paid. 

Material Elements of the Proposed Rule and Open Questions: 

1.    No Relocation or Expansion of Grandfathered Facilities.  CMS proposes that any Grandfathered Facility will lose its “excepted” status if it moves or relocates from the physical address listed on the provider’s enrollment form as of November 1, 2015.  The proposed rule also makes clear that Grandfathered Facilities may not expand without losing excepted status.  “In the case of addresses with multiple units, such as a multi-office building, the unit number is considered part of the address; in other words, an excepted hospital PBD  could not purchase and expand into other units in its building, and remain excepted.”  81 FR 45684.

2.    No Expansion of Services at Grandfathered Facilities.  In the proposed rule, CMS explains that it interprets Section 603 to apply to Grandfathered Facilities as they existed at the time the law was enacted and that those facilities may be paid under OPPS for services within the “clinical family of services” that they furnished at that time.  The proposed rule contains a list of 19 such clinical families that are defined by APC and HCPCS codes.  If a Grandfathered Facility adds a service from a clinical family that it did not provide before November 2, 2015, that service would be paid under the Medicare Physician Fee Schedule (“MPFS”) or other applicable payment rate and not OPPS. 

3.    Certain CHOWs Retain Excepted Status.  CMS proposes that if a hospital undergoes a change of ownership (“CHOW”) and the new owner assumes the existing provider agreement, Grandfathered Facilities included in the CHOW may retain their excepted status.  A single Grandfathered Facility may not, however, be transferred from one provider to another and retain its excepted status. 

4.    Payment for Services at Non-excepted Facilities.  The proposed rule indicates that for most items and services provided at a non-excepted facility, Medicare would pay the physicians who provided the items or services through a bill submitted on a professional claim form (CMS 1500) at the MPFS rate.  CMS acknowledged that this would require some hospitals to establish business arrangements with physicians for the bill to be submitted under the physician’s Medicare number and to share the reimbursement for these items and services and that such arrangement could implicate the fraud and abuse and other rules.  CMS stated that it is actively exploring options that would allow non-excepted facilities to bill under an applicable payment system, other than OPPS, and that the proposed policy is intended to be a temporary solution.

5.    Potential 340B Impact.  Hospitals that participate in the 340B program should consider the potential implications of the proposed rule on drugs dispensed in off-campus outpatient departments.  Currently, off-campus departments are permitted to dispense 340B discounted drugs if the hospital’s Medicare cost report includes covered outpatient costs and charges at that location.  If the proposed rule eliminates those costs from the cost report, hospitals may lose the ability to dispense 340B discounted drugs from those off-campus locations. 

Next Steps:  While we are all hopeful that CMS, in response to the public outcry about the overly restrictive proposed rule, will soften its position in the final rule, hospitals should take several proactive steps now to secure their ability to continue to receive OPPS payment for Excepted Services. 

A.    Keep a Record of Existing Off-Campus Facilities and Services.  Take an accounting of off-campus outpatient departments that were operating as of November 1, 2015, including their location, the physical structure and scope of services provided.  Obtain and retain copies of the hospital’s CMS 855A and hospital license application form in place at that time.  If any of the hospital’s off-site outpatient departments were inadvertently left off either form, consider whether additional documentation could be submitted to correct the error. 

B.    Provide Accurate and Complete Information Going Forward.  Inform staff of the importance of submitting complete and accurate information on hospital enrollment and licensing forms going forward to ensure that the addresses of any Grandfathered Facilities are correct and not inadvertently left off such forms. 

C.    Instruct Staff Against Making Changes to Off-Campus Departments. Instruct staff not to relocate, reduce or expand any off-campus hospital outpatient department without analysis of the impact of Section 603.  Similar analysis should be done for any changes in service mix at off-campus outpatient departments. 

D.    Billing for Non-excepted Services after January 1, 2017.  Determine how the hospital will bill for non-excepted services after January 1, 2017.  If the hospital does not employ the physicians who provide services at such locations, that may entail entering into agreements with physicians to accommodate billing under the physicians’ Medicare numbers.  It may also require the hospital to enroll as a new provider or supplier type such as a group practice or ASC.  Consideration should also be given to the fact that the proposed payment policy is intended by CMS to be a temporary solution until CMS can adapt its systems to accommodate payment for non-excepted items and services under the applicable payment system.


Lori K. Nomura
Foster Pepper

Philip E. Paine
Foster Pepper

This publication is for informational purposes only and does not contain or convey legal advice.

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Upcoming Events

We have a number of events planned for 2016 and more are coming!


WSHEF welcomes new Puget Sound Chapter of the Asian Healthcare Leaders Forum (AHLF) to the region!


In February of 2016, the American College of Healthcare Executives launched the Asian Healthcare Leaders Forum (AHLF) as a community within ACHE as a part of their ongoing commitment to advance diversity and inclusion in healthcare leadership.  AHLF aims to increase representation of Asian-Americans in healthcare management through professional development, continual learning, mentorship, and networking. Any ACHE member can join AHLF by going to http://www.ache.org/newclub/forums/AHLF/index.cfm and submitting a short online application. Forum annual dues fees are $100.


Please contact Paul Myoung at paul.myoung@swedish.org for more information about AHLF, a list of current AHLF members, signing up for the AHLF newsletter, and ways to become involved in the local Puget Sound Chapter. 


AHLF and WSHEF are planning a welcome, education and networking event for November of 2016.  Be on the lookout for an email invitation with more details in the coming weeks!




WSHEF Diversity Committee will host their next event featuring Dr Brian Wong, MD, MPH

Nov 16th 4:30-7:00pm

Grand Hyatt, Seattle WA




WSHEF Annual Breakfast Meeting

Friday, Oct 14th 7am - 8:30am

Bell Harbor International Conference Center

Seattle WA


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