CMS Proposes Loosening Restrictions on Some Physician-Owned Hospitals

The Centers for Medicare and Medicaid Services (“CMS”) has released proposed changes to the regulations governing physician-owned hospitals (“POHs”) with the stated goal of lowering patients’ out-of-pocket costs through changes to reimbursement policies for services, devices and drugs.

In the proposed rule released Aug. 4, CMS removes certain restrictions on POHs that qualify as “high Medicaid” facilities. Those facilities, by definition, serve more Medicaid inpatients than other hospitals in the counties in which they are located.

In particular, the rule would:

• permit high Medicaid POHs to request an exception to the prohibition on expansion more frequently than every 2 years;
• remove the cap on the number of additional operating rooms, procedure rooms and beds that can be approved in an exception for a high Medicaid POH; and
• remove the restriction requiring that permitted expansions occur only in facilities on the POH’s main campus for high Medicaid facilities.

The proposed rule also clarifies that certain beds are counted toward a POH’s baseline number of ORs, procedure rooms, and beds, and would eliminate the opportunity for community input in the review process for expansions of high Medicaid facilities.

Additionally, in the proposed rule, CMS announced its intent to eliminate the inpatient-only list over a three-year transitional period. Established in 2000, the inpatient-only list outlined certain services required to be provided in an inpatient setting, and thus excluded from the Medicare Hospital Outpatient Prospective Payment System. Concluding that a physician can use his or her own clinical judgment to determine whether a service is best provided in an inpatient or outpatient setting, the 2021 OPPS proposed rule would eliminate the inpatient-only list by January 1, 2024.

As a part of this plan, CMS proposed to extend a policy that exempts services previously on the inpatient-only list from site-of-service claim denials, BFCC-QIO referrals to Recovery Audit Contractors, and Recovery Contract Reviews for “patient status” for two calendar years.

Finally, the proposed rule reduces the payment rate for certain drugs purchased under the 340B drug savings program.

CMS also released its proposed rule updating the 2021 Medicare Physician Fee Schedule on August 3, 2020. In addition to changes to payment rates, the rule would expand telehealth services covered by Medicare, expand the scope of practice for certain mid-levels, and simplify billing and coding requirements for office and outpatient visits.

Comments for the proposed rules are due by 5 p.m. October 5, 2020.