CMS Draft Co-Location Guidance: The Deadline for Comment Nears

June 20, 2019

In draft guidance, the Centers for Medicare & Medicaid Services provides insight into how CMS would evaluate hospital co-location arrangements for compliance with the Medicare conditions of participation. CMS also solicits feedback from stakeholders; comments are due July 2.

Acknowledging that hospitals are increasingly co-locating “as they seek efficiencies and develop different delivery systems of care,” the Centers for Medicare & Medicaid Services (CMS) recently released a memorandum with draft guidance for state survey agency directors on hospital co-location with other hospitals or healthcare facilities. The draft guidance seeks “to provide clarity” on how CMS and surveyors will evaluate co-location arrangements under the Medicare conditions of participation (CoPs). In an unanticipated but welcome move, CMS is requesting comments on the draft guidance by July 2. Stakeholders should be sure to take this opportunity to raise their compliance concerns associated with the proposed rules governing shared space and staffing arrangements under the Medicare program.

What Is Co-Location?

CMS defines “co-location” as when “two hospitals or a hospital and another healthcare entity are located on the same campus or in the same building and share space, staff or services.” The hospital may be co-located in its entirety, or only certain parts of the hospital may be co-located with other healthcare entities. For example, co-location arrangements may include the following instances:

  • One hospital is entirely located on another hospital’s campus, or in the same building as another hospital.
  • Part of one hospital’s inpatient services (e.g., at a remote location or satellite) is in another hospital’s building, or on another hospital’s campus.
  • The outpatient department of one hospital is located on the same campus of, or in the same building as, another hospital or a separate Medicare-certified provider/supplier, such as an ambulatory surgical center, rural health clinic, federally qualified healthcare center, imaging center, etc.

CMS has not yet determined if co-location requires some sort of legal relationship between two parties, such as a shared services agreement, or whether locating near each other merely by chance results in the application of these rules.

CMS officials maintain that a leased space, if not accompanied by other indicia of a co-location arrangement, is not co-location as the tenant is responsible for that space under the terms of the lease agreement with the landlord hospital. With respect to timeshares, CMS officials recently indicated that the hospital must be responsible for maintaining that space, the equipment, and any supplies in order to comply with the Medicare CoPs. But if the hospital maintains that responsibility, timeshares may be possible.

Co-located hospitals must demonstrate separate and independent compliance with the Medicare CoPs. Areas that CMS will review when surveying co-located facilities include staffing, contracted services, distinct and shared spaces, and emergency services.


CMS officials have reiterated that each Medicare-certified hospital is responsible for independently meeting the staffing requirements under the CoPs and for any services the hospital provides, whether or not the staff are provided directly by the hospital, under arrangement, or under contract (including from healthcare entities that are co-located within the hospital).

Staff provided under arrangement or contract may be employed by both hospitals as long as they do not float between facilities or perform the same functions in both spaces simultaneously. Staff must always be immediately available to provide services, according to CMS. Examples of staffing positions where the draft guidance requirement would apply include nurses, nurse directors, pharmacy directors, dieticians, and other staff related to contracted services such as respiratory care, code teams, etc. The draft guidance provides an exception for medical staff, who may be shared with or float between co-located hospitals provided the medical staff are privileged and credentialed at each hospital.

The governing body must ensure the following when using staffing contracts:

  • Adequacy of staff levels
  • Adequate oversight and periodic evaluation of contracted staff
  • Proper training and education of contracted staff
  • Contracted staff’s knowledge of and adherence to the quality assurance and performance improvement (QAPI) standards of the individual hospital
  • Accountability of the contracted staff relating to clinical practice requirements

Contract staff must also receive the same education and training on all relevant hospital policies and procedures as direct employees of the hospital do.

Surveyors may ask to review staff schedules, personnel files for training, and orienting and training materials to assess compliance with the Medicare CoPs.

Contracted Services

The draft guidance allows for services to be provided under contract or arrangement with another co-located hospital or healthcare entity, and to be performed onsite or offsite, subject to the following conditions:

  • Oversight of the contracted services is provided by the governing body.
  • Contracted services are incorporated into the hospital’s QAPI program.
  • Clinical services provided under contract are not being simultaneously shared with another entity, though CMS recognizes that certain services, such as pharmacy services, can be provided to multiple hospitals at the same time.

Examples of contracted services include laboratory, radiology, dietary, maintenance, housekeeping, security, and shared system services (e.g., oxygen, medical gas, sprinklers, alarm systems). Examples of specific services that may not be contracted for, however, are not addressed by the draft guidance.

Distinct and Shared Spaces

CMS expects hospitals to have defined and distinct spaces of operation over which they maintain control at all times. The draft guidance distinguishes between “shared” space and “distinct” space, allowing for shared public areas such as entrances and waiting rooms, but limiting shared clinical space due to infection control, patient management, confidentiality, and other quality and safety concerns.

Distinct spaces are clinical areas designated for the care, safety, and privacy of patients. These include inpatient nursing units, medical record departments, clinical hospital departments (e.g., outpatient clinics, laboratory, pharmacy, imaging services, operating room, post-anesthesia care unit, emergency department), and patient registration areas, excluding waiting areas.

Shared spaces are public spaces and public paths of travel used by the hospital and the co-located healthcare entity. These include public lobbies, waiting rooms and reception areas (with separate “check-in” areas and clear signage), public restrooms, staff lounges, elevators and main corridors through nonclinical areas, and main entrances to a building. Hospitals will have to determine on their own whether corridors and other passageways are sufficiently removed from clinical areas, such as nursing stations, that they can be deemed shared spaces. CMS maintains that each of the co-located facilities is individually responsible for its compliance with the Medicare CoPs.

To assess compliance, the draft guidance directs surveyors to ask for a floor plan that distinguishes between the specific spaces/locations being used by the hospital under survey and those used by the other co-located entit(ies), along with a list of the services provided by each. Life Safety Code surveys will cover both entities when utilizing shared systems such as alarm systems, compressed air systems, and the like. Any deficiencies cited in a shared space will trigger a complaint survey for noncompliance in the other co-located entity, which may also be subject to additional compliance requirements.

Emergency Services

A co-located hospital may or may not offer emergency services, according to CMS. Hospitals without emergency departments must have appropriate policies and procedures in place for addressing emergency care needs 24 hours a day, 7 days a week. If emergency services are provided by nonprofessional staff under contract, the staff must be immediately available at all times and only committed to services at that hospital when providing such emergency services.

CMS considers co-located hospitals that contract for emergency services as providing emergency services subject to the Emergency Medical Treatment and Active Labor Act rules. CMS directs that such hospitals must anticipate potential emergency scenarios typical of the patient population they routinely care for in order to develop policies and procedures and to ensure staffing for the safe and adequate initial treatment of an emergency. To that end, there may be times when appraisal and initial treatment performed in one hospital require the appropriate transfer of a patient to the other co-located facility for continuation of care.

When evaluating the emergency care of patients in a co-located hospital without an emergency department, the draft guidance directs surveyors to review how the hospital responds to its own patients in hospital emergencies, with its own trained staff and not that of another hospital or entity. This will include a review of hospital staff training for appraisal of emergencies, initial treatment, and referral when appropriate, as well as a review of emergency patient resuscitation equipment (e.g., automated external defibrillator, code cart, intubation tray, medications) and the use of emergency equipment.

Comments on the draft co-location guidance are due by July 2.


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

Washington, DC
Michele Buenafe
Kathleen McDermott
Scott Memmott
Albert Shay
Howard Young
Jacob Harper

Greg Etzel
Scott McBride

San Francisco
Reece Hirsch 

Mark Stein