Passage of the Bipartisan Budget Act: What You Should Not Do Now

November 04, 2015

Tips on preserving the provider-based status for existing clinics.

The Bipartisan Budget Act of 2015 (H.R. 1314) was signed into law on Monday, November 2. Notwithstanding significant concerns raised by the hospital community, the new law includes a provision that precludes hospitals from establishing new provider-based clinics capable of receiving hospital payments. Any new provider-based clinic formed after November 2 will only qualify for hospital payments through December 2016. Provider-based emergency departments and on-campus, provider-based sites are unaffected by the legislation. The text of the legislation can be found here.

Although the legislation by itself is already quite Draconian, its implementation by CMS could potentially magnify the adverse impact to hospitals. Until CMS issues further guidance, hospitals should refrain from taking certain actions that could jeopardize the provider-based status of their existing clinics. Specifically:

  • Do not relocate any provider-based clinics. It is unclear whether CMS will allow providers to relocate a provider-based site, even if the reason for the relocation is that the current location no longer meets Life Safety Code standards or is otherwise damaged in a flood or fire. For instance, for certain critical access hospital provider-based clinics, CMS has previously stated that a relocation is viewed as a new site that would not be subject to grandfathering.
  • Do not add square footage or service lines. The statute uses the term “department,” which has never been clearly defined by CMS. Whether the site in its entirety qualifies as the department, or whether its current footprint is the department remains an open question.
  • Do not merge hospitals. If one hospital merges its provider number into another provider, it is unclear whether the retirement of the merged hospital’s provider number will mean that its provider-based clinics would all now be considered newly established clinics for the surviving hospital, and therefore not qualified for payment from 2017 forward.
  • For secondary campuses, do not open up clinics more than 250 yards from the main buildings. The legislation references that the current standards for determining what is on campus shall remain in effect for the primary campus, meaning that, although generally the clinic must be within 250 yards of the hospital’s main buildings, a CMS Regional Office could determine that a clinic is on campus even if it is technically further away than that. But for “remote locations,” i.e., secondary campuses, the legislation specifically requires that the “distance” requirements be met. This language leaves open the question as to whether a CMS Regional Office still has discretion to consider clinics as provider-based outside of that 250-yard perimeter for the secondary hospital campus.

Hospitals that are currently in the middle of implementing plans that involve any of the above should contact their CMS Regional Office to determine what the impact of consummating those plans will have on their provider-based status. Otherwise, the hospitals risk permanent loss of their clinics’ existing provider-based status.

Additional questions where CMS’ expeditious input would be welcome include the following:

  • What happens if a hospital determines that it had experienced technical non-compliance, either at the date of enactment of the legislation, or sometime thereafter? Will it permanently lose its provider-based status?
  • If a provider-based clinic is threatened with loss of its provider-based status because of a disagreement with CMS or its Medicare contractor regarding an interpretation of the provider-based regulations, will it have appeal rights? There is a very broad provision precluding judicial review in the legislation, and it is unclear whether CMS will interpret that provision as precluding appeal rights of a CMS determination of non-compliance of a grandfathered facility with the provider-based regulations.
  • Will CMS require Medicaid programs to comply with this statute? For instance, if a state Medicaid program pays differently for provider-based skilled nursing facilities, but Medicare does not, will newly created provider-based skilled nursing facilities not be recognized by Medicaid?

These are all critical open issues that likely affect a number of ongoing arrangements. CMS should be urged to weigh in even before its next rulemaking cycle so as to bring certainty back to the hospital community. Lastly, HRSA should be urged to reconsider its requirements that 340B drugs only be dispensed in provider-based space given the limitations of the Bipartisan Budget Act. If a clinic would otherwise qualify as provider-based under existing rules, then it should be allowed to administer 340B drugs at that space, even if it is not actually reimbursed under the outpatient prospective payment system.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Andrew Ruskin
Jacob Harper