21st Century Cures Act: Who Does the “Mid-Build” Exception Help?

Hospital Industry Viewpoint

December 20, 2016

The exception helps a number of hospitals with their provider-based sites that had been under construction in November 2015, but not as many as may initially appear. Read on if you are interested in understanding the legislation and who it may help.

Last week, the sweeping 21st Century Cures Act was passed into legislation, which included a small gift to hospitals that had been caught unawares by last year’s passage of the Bipartisan Budget Act (BiBA). Although BiBA sunsetted outpatient prospective payment for new off-campus hospital departments, the 21st Century Cures Act gives a partial reprieve to hospitals that were in the midst of building new sites when BiBA passed. Closer inspection of the “mid-build” exception, however, shows that it likely will have a very narrow effect.

The mid-build exception has two prongs to it. The first provides relief to hospitals that had off-campus sites that were nearly operational when BiBA was passed. BiBA precluded hospital outpatient payment for new hospital sites that did not submit outpatient claims for the site prior to the date of BiBA’s enactment (i.e., November 2, 2015). For such “nongrandfathered” sites, payment for claims would be a freestanding basis after January 1, 2017. Under the 21st Century Cures Act, if a hospital began submitting outpatient claims for a site shortly thereafter and filed a provider-based attestation prior to December 2, 2015, it would still be grandfathered. Given the one-month window for filing an attestation, clearly this is a very limited exception.

The second prong for the exception is slightly wider. To meet the second exception, three criteria relating to the site that had been under construction need to be present:

(1) The hospital must file a provider-based attestation for the site, which the Medicare program must receive within 60 days of the 21st Century Cures Act’s enactment (i.e., Feb. 11, 2017).
(2) The hospital must add the site as a new location through an 855.
(3) The hospital CEO or CFO must file a certification that the mid-build requirement had been met, (i.e., the hospital had a contract with a third party for the actual construction for the site before November 2, 2015).

Hospitals that satisfy these criteria will be considered grandfathered beginning January 1, 2018. Although the criteria seem straightforward, there will be many situations where their application may not be clear. The following addresses some of the unanswered questions.

What does “actual construction” mean?

Although pouring concrete and erecting steel beams clearly qualify as “actual construction,” it remains unknown if Medicare will accept other signs of “construction,” such as (a) leasing new space, (b) rehabilitating an existing space, or (c) tearing down an existing site. In the case of other grandfathering provisions, Congress had added terms such as renovation, lease, and demolition. Their absence here may lead Medicare to be very narrow in what constitutes actual construction.

By what date does the site need to be operational?

The legislation only requires the submission of an attestation. There is no express prohibition against filing an attestation for a site that is yet to be opened. In our experiences, however, the Centers for Medicare and Medicare Services (CMS) Regional Offices generally do not accept attestations until a site is operational. Notably, the legislation only requires that a CMS regional office “receive” the application and not that it “accept” it. Further interpretation by CMS would be warranted.

What about staged construction?

If some portions of a site are open first, the question arises about whether an entire complex can still be grandfathered. This will likely be a facts and circumstances determination. If, for instance, a medical office building is under construction, with only certain suites designated as provider-based, then only those suites that timely meet the legislative criteria will likely be viewed as provider-based. CMS has been clear that grandfathered status is address-specific. Thus, unless a whole building is provider-based and shares one address, portions of new sites that remain under construction past the applicable time frame will likely not benefit from the legislation. This would be especially true if there are still uncertainties about how space will be used and therefore a provider-based attestation would not be possible.

What happens to these sites in 2017?

The legislation requires that these sites flip to nongrandfathered status on January 1, 2017, and then flip back to grandfathered status on January 1, 2018. This will likely create confusion for patients experiencing significant fluctuations in their co-insurance. Careful messaging will be required.

Does any of this affect 340B?

No—340B status is determined by if a site’s costs are placed on a reimbursable line of the cost report. Meeting the requirements for provider-based status is not affected by how the site is paid.

Next Steps

Much needs to be determined, and quickly, by the Medicare program to implement the act. In the meantime, hospitals that think there is even a chance of qualifying should begin to compile their attestations. They should also file their attestations as soon as possible to allow for discussions with the CMS Regional Offices to the extent necessary to secure their grandfathered status.