Recent Provider-Based Legislative Changes: Any GME Implications?

On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015, among other things, making changes to Medicare reimbursement for outpatient services furnished in off-campus provider-based departments (Off-Campus PBDs). (For more details about the new law’s impact on Off-Campus PBDs, read Dentons’ in-depth analysis about how the Bipartisan Budget Act materially impacts hospital outpatient services reimbursement.) Off-Campus PBDs that provided outpatient services as of November 2, 2015, will be “grandfathered” and will continue to be paid under Hospital Outpatient Prospective Payment System (OPPS) rates. Beginning January 1, 2017, however, any facility that begins billing as an Off-Campus PBD on or after November 2, 2015, will not receive OPPS rates but rather will be paid under the lower Medicare Physician Fee Schedule (MPFS) or ambulatory surgery center (ASC) rates, as applicable.

All of this raises the question: after November 2, 2015, are there still reasons for hospitals and health systems to create Off-Campus PBDs? On one hand, there are clinical and financial integration challenges and administrative burdens and costs associated with meeting the requirements of the provider-based regulations (42 C.F.R. § 413.65). On the other hand, there may be reasons aside from OPPS rates that a hospital may choose to seek provider-based status for a new off-campus site, including Medicare graduate medical education (GME) rules, qualification for the 340B drug pricing program, and implications for Medicaid disproportionate share hospital (DSH) payment limit calculations.

With respect to Medicare GME payments, rules for counting resident time differ depending on whether the resident is training in a provider-based hospital outpatient department or in a non-hospital clinical setting (often a physician office). For hospitals to claim the time residents spend training at non-hospital sites for Medicare GME payment purposes, the hospital itself must pay the trainees’ stipends and benefits, and the hospital must follow non-hospital site time-counting rules. Additionally, less training time is countable for Medicare GME payment purposes in these non-hospital settings, given that didactic training time may not be counted for indirect medical education (IME) payment purposes.  In contrast, when residents are training in provider-based hospital outpatient departments, hospitals need not worry about which entity is paying the residents’ stipends and benefits and may count all didactic training time for GME payment purposes. 

Even after January 1, 2017, non-grandfathered off-campus PBDs will still be considered hospital settings for GME purposes, despite no longer receiving OPPS rates. Accordingly, a hospital should take into consideration the GME benefits of having training occur in a provider-based setting when assessing whether to obtain or retain provider-based status for a given off-campus site.