Provider Based – Lessons Learned from the Land of Cheeseheads

1. Provider Based – Lessons Learned from the Land of Cheeseheads By David H. Snow Hall, Render, Killian, Heath & Lyman, PC Oregon HFMA February 17, 2011

2. Provider Based – Basics • Debunking the myth of: • "Provider based clinics" • "Provider based billing" • There is no rabbit in the hat • THIS IS JUST HOSPITAL BILLING • Facility fee on a UB-04 • Professional on 1500 (unless CAH elects all-inclusive) • Just like traditional hospital based doctors in ER, radiology, anesthesiology etc… 2

3. Provider Based - Basics • Duck Rule: • Looks like a duck, • Walks like a duck, • Sounds like a duck, then... • IT’S A DUCK • And…. They will probably beat the Beavers 3

4. Provider Based - Basics • Provider Based = Reverse Duck Rule: • Provider Based - If you want to get paid like a HOSPITAL, then ….. • Look like a hospital • Walk like a hospital • Sound like a hospital • PB Status is NOT a special payment status - except for certain RHCs 4

5. The Various Meanings of "Hospital" • Hospital = the "building" • Hospital = the "Provider" – Operations certified by Medicare as "hospital" • Hospital = the "Corporation" Articles of Incorporation 5

6. Provider Based - Basics • Regulation 42 C.F.R. 413.65 defines what operations are part of a Medicare certified provider (vs. supplier) • It determines what services can be billed under the Medicare provider number • Provider = hospital, CAH, SNF, HHA, Hospice, CORFs, RHC, FQHC, CMHC • Originally 413.65 applied to ALL providers, but was amended in 2002 to effectively limit to hospitals/CAHs 6

7. Provider Based - Exclusions • 413.65 Not applicable to PB status of: • ASCs, CORFs, HHAs, SNFs, Hospices • Inpatient rehab units • IDTF’s and labs paid only on fee schedule • PT/OT/ST Unless at a CAH or caps suspended • ESRD - see 413.174 • Ambulance • Non-revenue producing departments • With exclusions, 413.65 effectively only applies to hospital o/p departments and RHCs 7

8. Provider Based - Exclusions • BUT…. • Exclusions based on “No harm ($) no foul” theory - Look Carefully • Apply 413.65 even if excepted, or not addressed, if PB status for some reason affects • Medicare payments • Beneficiary deductible/coinsurance 8

9. Provider Based - Definitions • Main provider - provider that creates or acquires another entity to deliver additional services in its name, etc. • Campus - physical area of main buildings and others within 250 yards • Department of a provider - facility or organization that is created or acquired by main provider to provide services in its name etc. 9

10. Provider Based - Definitions • Provider based entity - separately certified provider owned by main provider (traditional “hospital based” concept) SNF, RHC, etc. • Remote location of a hospital - another site that furnishes I/P services • Freestanding facility - entity that is not provider based 10

11. Provider Based -Requirements • Universal PB requirements - all facilities or organizations: • Common licensure - if allowed by state law • Financial Integration – must be included in hospital trial balance & allowable cost centers on cost report, same as any other hospital department 11

12. Provider Based -Requirements • Universal PB requirements - all facilities or organizations: • Clinical Integration – • Same clinical oversight as any hospital dept: Medical director, QA, UR, etc. • Medical records – unified retrieval system or cross reference • Medical staff of hospital have clinical privileges at site/facility 12

13. Provider Based -Requirements • Universal PB requirements - all facilities or organizations: • Public Awareness – patients must be aware when they enter facility that they are being treated as hospital patients • signage, registration forms, phone listings, internet, marketing materials, etc must all use hospital name 13

14. Provider Based - Requirements • OFF CAMPUS sitesmust also meet: • Common ownership - same legal entity & governing body • Administration and supervision - • same supervision as any other provider department • HR, billing, payroll, benefits, records, purchasing, salary structure done by same employees • Location - within 35 miles of main provider or meet market share test • Management contract rules apply • Joint venture prohibited 14

15. Provider Based - Requirements • Required management contract terms - OFF CAMPUS SITES: • provider’s control is clear • provider employs all non-management employees providing patient care (excluding those that can separately bill – physicians/midlevels) • management personnel must follow provider policies • manager’s policies must be approved by provider • periodic written reports required • on-site personnel subject to provider’s approval 15

16. Provider Based- Hospital Department Obligations • Site of service indicator- professional component must be billed at facility RVUs • All terms of provider agreement - deficiencies at any site jeopardize entire hospital provider status • Non-discrimination provisions applicable to physicians • EMTALA obligations • On campus – apply as part of hospital • off campus – apply only if held out as urgent care or >1/3 patient visits are unscheduled 16

17. Provider Based - Hospital Department Obligations • Treat all Medicare patients as hospital patients (facility/tech.on UB-04) • DRG 3 day payment window applies • Off campus sites must provide notice of dual coinsurance (facility/technical & professional components) to each Medicare patient before services provided (unless emergent) • Meet all applicable Medicare hospital conditions of participation • includes hospital building code! 17

18. Provider Based - Requirements • A facility or organization cannot be provider based if all patient care services are furnished under arrangement • Facility and organization not defined - used in definition of department • UA defined elsewhere as any contract that prohibits “vendor” from billing Medicare directly 18

19. Provider Based - Requirements • Joint Venture Rules • ON CAMPUS provider based joint venture allowed if: • On campus of provider/owner • Can be PB to that owner only • No minimum ownership % required • Meets universal requirements and obligations (when applicable) • Complicated conundrum… • Bill by hospital corp, but belongs to JV • Requires UA type contract terms • OFF CAMPUS site cannot be provider based if operated by a joint venture 19

20. Provider Based - In Practice • Common Questions/misperceptions • Have to employ the docs? • Have to employ all staff? • Must own the real estate? • Don't understand that professional component HAS to be billed as place of service 22 – hospital outpatient (very essence of PB'd) • Have to split bill ALL patients on UB/1500 • Have to get advance CMS approval • Wholly owned subsidiary meets ownership requirement • Can you pick & choose PB'd sites? • Only applies to ancillaries • Always increases Medicare revenue 20

21. Provider Based - In Practice • Legal/business structure • Clinic operations in same corporate entity? • On campus – technically NO, but beware of under arrangement limit – practically Yes • Off campus - YES • Don’t need to employ physicians - OK to contract for (just like ER/UC) • Non-physician patient care staff: • On campus - don’t need to employ • Off campus - must employ, or contract for, from same source as hospital contracts from if there is a management contract 21

22. Provider Based - Attestations • Application to &/or pre-approval by CMS NOT REQUIRED • Eliminated by 8/1/02 PPS regulations for FFY 2003 • 413.65 now says may submit “attestation”: • Notify CMS of PB locations • State that applicable requirements met • Attest to meeting Obligations • May notify CMS of material changes • Voluntary - self monitoring process 22

23. Provider Based - Attestations • No official form published • Use CMS "Sample Format" outline from Transmittal A-03-030, April 18, 2003 • Send to FI & copy to Regional Office • On campus – supporting documentation not required (recommend sending anyway) • Off campus - required • FI may make determination • RO should either approve or disapprove 23

24. Provider Based - Attestations • Benefits of Attestation: • CMS only recoups excess payment • Triggers self-review of criteria • Supports compliance process • Educates staff on requirements • 413.65 says - not provider based because believed to be!!!! • STRONGLY RECOMMEND FILING • BUT BE PATIENT – FI/RO may be slow • We have had non-responses and lost attestations 24

25. Financial Impact • Amount of, or even any, increased revenue is not automatic, varies by: • specialty • payor mix • volume • rural vs. urban • Must do case specific analysis • Compare current physician payment to: • Hospital based payment: • Cost for technical component • Physician professional component only • “Facility” RVUs 25

26. Financial Impact • Financial Impact - general observations • APCs Usually more vs. PFS • VERY ROUGH Rule of thumb - $20-30,000 per physician • More for procedure based specialists • Reflects historical reliance on cost built into APC system – 24/7/365 etc make hospital more costly • Can be bigger for CAH PB'd sites • Even bigger for CAH based RHCs 26

27. Financial Impact • Significant portion of increase can be in co-pay • 20% of hospital technical charge> • 20% of physician fee schedule allowed charge for facility/technical • Consider PR impact of two co-pays • Often covered by Medigap policies 27

28. Provider Based Billing Payment Example #1 - How it Works 28

29. Provider Based Billing Payment Example #2 - How it Works + 29

30. Provider Based Billing Payment Example #3 - How it Works 30

31. Provider Based Billing Payment Example #4 - How it Works 31

32. Conditions of Participation • Come full circle? • Yes - no approval required • NO, there are now consequences • Where rubber meets the road • JCAHO survey • Hospital selected for State Survey • Survey finds that all is NOT well - LSC issues, signage, ??? • Used to be - Fix or go free standing • Now - recoup prior $$ • Jeopardizes entire hospital not just site 32

33. Conditions of Participation • Hospital Facility/Life Safety Code Requirements • 3 Levels: application depends on services w/i space • Health Care Occupancy – inpatient • Ambulatory Health Care Occupancy – "outpatient" • 4 or more patients receiving treatment that renders them incapable of taking action for self-preservation under emergency conditions….. • Distance to exits, backup generator, 1 hour firewalls, sprinklers? Etc…. • Business Occupancy – everything else including patient services • Mixed use buildings: PB'd and FS'g portions • LSC applies only to PB'd portion, but • May affect other portions – firewalls, etc. 33

34. Direct Employment • Direct Employment by Hospital ? • Off campus site, AND • Management contract (no definition) • Applies to workers directly involved in patient care not billable under fee schedule • RNs, LPNs, aides, techs, etc. • NOT docs, M/Ls, PTs ? • NOT registration, reception, billing, coders, etc. • Workaround? • Instead of moving patient care workers • Move managers – so no management contract • Who - site administrator, right to hire/fire? 34

35. Public Awareness - Branding • Public Awareness – Naming/Branding/Signage • THE Hospital name is required – a must • Multiple tag lines are fine • Community Hospital • Mayberry Clinic • Spectacular Medical Group • Spectacular Health System • Hospital does not need to be first or biggest • But, avoid fine print "Community Hospital" • Not just signage: marketing materials, registration, phone listings, websites……. 35

36. Public Awareness - Branding • Public Awareness – Naming/Branding/Signage • Multi-hospital example: • 4 system hospitals in region – flagship & 3 outlying CAHs • 200+ employed docs @ 15 clinic locations • All locations provider based to 1 of 4 hospitals • Some on campus, some off • System going through corporate branding & wanted all 4 hospitals to have the same name • We asked CMS regional office • No prohibition on hospitals having same name, but…. • Won't work here: patients at off campus PB'd clinics won't know which hospital the site is based to….. • Patient needs to know which hospital 36

37. Public Awareness - Branding • Public Awareness – Naming/Branding/Signage • PBC of Hospital A in/on campus of Hospital B? • Technically can do – but don't get too cute – inside hospital B too "confusing" for patients • Example: Urban System Regional Cancer Program • Inner city flagship – DSH/340B eligible • Multiple suburban hospitals • Put Flagship Cancer Centers at each Suburban Campus, but in separate buildings and be PB'd? • CMS said YES 37

38. Mixed Use Sites • Mixed Use Sites: Part PB'd – Part FS'g • Surveyors don't like comingling – be careful • Patient care areas need to be dedicated to one or other for at least block time periods • Shared waiting/reception ok? • As long as meet public awareness – signed as hospital • There is no public awareness standard for FS'g space • Follow Stark exclusive use standards even when N/A because of System Medical Group • Don't forget cost reporting allocations • Off Campus: >12/31/10 must meet immediately available supervision standard for that site • <1/1/11 had to meet NFL Catch rule @ site 38

39. Bill All Patients as PB'd? • Private pay: to bill or not to bill (as provider based)? • All Medicare patients must be billed as hospital patients – 413.65(g)(5) • Have obtained CMS regional office confirmation that this N/A to: • Medicare Advantage patients and • Medicare secondary • Private Pay point of service payment by patient may be significantly higher than FS'g - tread carefully: • has lead to bad press – see Wisconsin example, and • LAWSUITS – see Washington/Seattle consumer class action example 39

40. Bill All Patients as PB'd? 40

41. Bill All Patients as PB'd? 41

42. System Medical Group Scenario • Physicians wanted their own entity w/i system • Created as wholly controlled subsidiary or sibling of hospital corporation • Multiple sites on and off campus operating/billing as FS'g • As group evolved/grew - ancillaries tend to be consolidated into hospitals to minimize duplication • Medical group "losing" money and being subsidized by hospitals – practice support payments or intra-system transfers 42

43. Current Structure System, Inc. Hospital Inc. Medical Group Inc. (Various Clinic Sites) Global Billing (Facility & PC) Employed Physicians Patients & Payors 43

44. System Medical Group • Solution ???? – Provider Based Conversion • Increases revenue from office services • Puts clinic financial operations in same corporation as hospital operations • If structured properly makes Medical Group a break even operation, by definition • Subjects clinics to same operational requirements as hospital – accreditation/survey • Works best with RVU based or similar comp method for physicians, revenue not so much 44

45. A Typical Transaction(to achieve provider based) System, Inc. Medical Group Inc. Hospital Inc. Business Transfer • Sell or lease assets • Professional Service Agreement • Non-physician staff? Clinic Depart- ment Employed Physicians 45

46. Typical Provider Based Structure: System MG System, Inc. Hospital Inc. Medical Group Inc. Service Agreement(s) Physicians Staffing? Management? Clinic Depart- ment Facility Billing* & PC? Employed Physicians Patients & Payors • * - Facility billing must shift to Hospital – (essence of Provider Based) • - Professional component billing does not have to shift, but: • Revenue will go down due to Medicare site of service impact • Medicare revenue would increase if billed by CAH (115%) 46

47. Medical Group/PSA Structure • Medical group does not have to reassign PC • But – then MG may not be breakeven due to POS reduction in Medicare payment • PSA comp method will be more complicated – revenue guaranty • Think about placing non-PB'd sites in hospital too • Does not have to be commonly controlled MG • Can and does work with independent MG • PSA Comp method is everything to MG • Only source of revenue • Do Not forget DRG payment window 47

48. Provider Based - In Practice • Miscellaneous benefits/detriments • 340B follows PB'd – drugs used at PB'd departments are eligible for 340B discounts • Residents in PB'd site count for IME/DME FTE count • Docs in O/P departments POS 22 but not I/P or ER (POS 21 & 23) count for EHR incentives • Cannot use Stark group practice comp methodology for ancillary bonus pools • If docs employed by hospital, by definition not GP • Medical Group Inc is GP, BUT ancillaries will not be part of its business – will be in hospital • Services in PB'd site covered by DRG payment window 48

49. Provider Based - In Practice • Choice of Hospital to be Based to: • Sites w/i 35 miles of >1 hospital in a system? • PPS • Rural sole community? Extra 7% • DSH/340B eligible • FTE count for IME/DME • <50 beds – HB'd RHC = cost for professional component • CAH • Facility component cost based • Professional component - Method II -115% • HB'd RHC = cost for professional component • IRF/Psych/LTCH - paid APCs for O/P too 49

50. THE ENDThank you! David H. Snow Hall, Render, Killian, Heath & Lyman, PC dsnow@hallrender.com 414-721-0447 #1043923