Provider Based –
Lessons Learned from the Land of
Cheeseheads
By David H. Snow
Hall, Render, Killian, Heath & Lyman, PC
Oregon HFMA
February 17, 2011
Provider Based – Basics

Debunking the myth of:




There is no rabbit in the hat
THIS IS JUST HOSPITAL BILLING



2
"Provider based clinics"
"Provider based 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…
Provider Based - Basics

Duck Rule:





3
Looks like a duck,
Walks like a duck,
Sounds like a duck, then...
IT’S A DUCK
And…. They will probably beat
the Beavers
Provider Based - Basics


Provider Based = Reverse Duck Rule:
Provider Based - If you want to get paid
like a HOSPITAL, then …..




4
Look like a hospital
Walk like a hospital
Sound like a hospital
PB Status is NOT a special payment
status - except for certain RHCs
The Various Meanings
of "Hospital"

Hospital = the "building"

Hospital = the "Provider" –
Operations certified by
Medicare as "hospital"

5
Hospital = the
"Corporation"
Articles of
Incorporation
Provider Based - Basics




6
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
Provider Based - Exclusions

413.65 Not applicable to PB status of:








7
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
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


8
Medicare payments
Beneficiary deductible/coinsurance
Provider Based - Definitions



9
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.
Provider Based - Definitions



10
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
Provider Based Requirements

Universal PB requirements - all
facilities or organizations:


11
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
Provider Based Requirements

Universal PB requirements - all
facilities or organizations:

Clinical Integration –



12
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
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

13
signage, registration forms, phone listings,
internet, marketing materials, etc must all
use hospital name
Provider Based Requirements

OFF CAMPUS sites must also meet:


Common ownership - same legal entity &
governing body
Administration and supervision 




14
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
Provider Based Requirements

Required management contract terms - OFF
CAMPUS SITES:






15
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
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


16
On campus – apply as part of hospital
off campus – apply only if held out as urgent care
or >1/3 patient visits are unscheduled
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

17
includes hospital building code!
Provider Based Requirements

A facility or organization cannot
be provider based if all patient
care services are furnished under
arrangement


18
Facility and organization not defined used in definition of department
UA defined elsewhere as any contract
that prohibits “vendor” from billing
Medicare directly
Provider Based Requirements

Joint Venture Rules

ON CAMPUS provider based joint
venture allowed if:





Complicated conundrum…



19
On campus of provider/owner
Can be PB to that owner only
No minimum ownership % required
Meets universal requirements and
obligations (when applicable)
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
Provider Based - In Practice

Common Questions/misperceptions









20

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
Provider Based - In Practice

Legal/business structure

Clinic operations in same corporate entity?




Don’t need to employ physicians - OK to
contract for (just like ER/UC)
Non-physician patient care staff:


21
On campus – technically NO, but beware of under
arrangement limit – practically Yes
Off campus - YES
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
Provider Based Attestations

Application to &/or pre-approval by CMS
NOT REQUIRED


413.65 now says may submit “attestation”:





22
Eliminated by 8/1/02 PPS regulations for FFY
2003
Notify CMS of PB locations
State that applicable requirements met
Attest to meeting Obligations
May notify CMS of material changes
Voluntary - self monitoring process
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




23
On campus – supporting documentation
not required (recommend sending anyway)
Off campus - required
FI may make determination
RO should either approve or
disapprove
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

24
We have had non-responses and lost attestations
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:



25
Cost for technical component
Physician professional component only
“Facility” RVUs
Financial Impact

Financial Impact - general
observations

APCs Usually more vs. PFS





26
VERY ROUGH Rule of thumb - $2030,000 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
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
Provider Based Billing
Payment Example #1 - How it Works
Medicare
Chest X-ray
Freestanding clinic - 71020
Charge
Medicare
Allowable*
APC*
Reimburses
Coins.
$
140.00
$
31.34
$
25.07
$
6.27
- Professional fee
$
63.00
$
10.79
$
8.63
$
2.16
- Facility fee
$
77.00
$
39.18
$
9.01
Total Payment - PB clinic
$
47.81
$
11.17
Increase in reimbursement/visit
$
22.74
$
4.90
Provider-based clinic
$
Increase %
*Portland, Oregon 2011 Medicare fee schedule; Portland 2011 APC payment rate.
28
48.19
90.70%
78.10%
Provider Based Billing
Payment Example #2 - How it Works
MRI - lower extremity
Charge
Freestanding clinic - 73721
$ 1,517.00
$
415.67
$
332.54
$
83.13
- Professional fee
$
$
67.18
$
53.74
$
13.44
- Facility fee
$ 1,257.00
$
213.81
$ 135.13
Total Payment - PB clinic
$
285.55
$ 148.57
Increase in reimbursement/visit
$
(46.99) $
Allowable*
APC*
Reimburses
Coins.
Provider-based clinic
260.00
$ 366.94
Increase %
*Portland, Oregon 2011 Medicare fee schedule; Portland 2011 APC payment rate.
+
Capped TC amount based on DRA 2005.
29
(14.10%)
65.44
78.70%
Provider Based Billing
Payment Example #3 - How it Works
Medicare
CV Stress Test (tracing only) Charge
Allowable*
Freestanding clinic - 93017
Medicare
APC*
Reimburses
Coins.
$
242.00
$
54.73
$
43.78
$
10.95
- Professional fee
$
-
$
-
$
-
$
-
- Facility fee
$
242.00
$
149.47
$
41.44
Total Payment - PB clinic
$
149.47
$
41.44
Increase in reimbursement/visit
$
105.69
$
30.49
Provider-based clinic
$ 190.91
Increase %
*Portland, Oregon 2011 Medicare fee schedule; Portland 2011 APC payment rate.
30
241%
278.40%
Provider Based Billing
Payment Example #4 - How it Works
Office/Outpatient Visit New Patient - Level 1
Freestanding clinic - 99201
Charge
Medicare
Allowable*
APC*
Medicare
Reimburses
Coins.
$
185.00
$
40.91
$
32.73
$
8.18
- Professional fee
$
100.00
$
25.38
$
20.30
$
5.08
- Facility fee
$
85.00
$
45.55
$
10.48
Total Payment - PB clinic
$
65.85
$
15.56
Increase in reimbursement/visit
$
33.12
$
7.38
Provider-based clinic
$
Increase %
*Portland, Oregon 2011 Medicare fee schedule; Portland 2011 APC payment rate.
31
56.03
101.20%
90.20%
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, ???



32
Used to be - Fix or go free standing
Now - recoup prior $$
Jeopardizes entire hospital not just site
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"




Business Occupancy – everything else including patient
services
Mixed use buildings: PB'd and FS'g portions

33
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….

LSC applies only to PB'd portion, but
May affect other portions – firewalls, etc.
Direct Employment

Direct Employment by Hospital ?



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?


34
Off campus site, AND
Management contract (no definition)

Instead of moving patient care workers
Move managers – so no management contract
Who - site administrator, right to hire/fire?
Public Awareness - Branding

Public Awareness – Naming/Branding/Signage


THE Hospital name is required – a must
Multiple tag lines are fine







35
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…….
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




System going through corporate branding & wanted all 4
hospitals to have the same name
We asked CMS regional office



36
All locations provider based to 1 of 4 hospitals
Some on campus, some off
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
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?

37
CMS said YES
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?





38
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
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:



Private Pay point of service payment by patient may
be significantly higher than FS'g - tread carefully:


39
Medicare Advantage patients and
Medicare secondary
has lead to bad press – see Wisconsin example, and
LAWSUITS – see Washington/Seattle consumer class
action example
Bill All Patients as PB'd?
40
Bill All Patients as PB'd?
41
System Medical Group Scenario





42
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
Current Structure
System, Inc.
Medical Group Inc.
Hospital Inc.
(Various Clinic Sites)
Patients & Payors
43
Employed
Physicians
System Medical Group

Solution ???? – Provider Based
Conversion





44
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
A Typical Transaction
(to achieve provider based)
System, Inc.
Hospital Inc.
Clinic
Department
Business Transfer
Medical Group Inc.
•Sell or lease assets
•Professional Service Agreement
•Non-physician staff?
Employed
Physicians
45
Typical Provider Based
Structure: System MG
System, Inc.
Hospital Inc.
Medical Group Inc.
Clinic
Department
Service Agreement(s)
Physicians Staffing?
Management?
Facility Billing*
& PC?
Patients & Payors
46
Employed
Physicians
* - 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%)
Medical Group/PSA Structure

Medical group does not have to reassign PC





Does not have to be commonly controlled MG
Can and does work with independent MG



47
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
PSA Comp method is everything to MG
Only source of revenue
Do Not forget DRG payment window
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



48
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
Provider Based - In Practice

Choice of Hospital to be Based to:


Sites w/i 35 miles of >1 hospital in a
system?
PPS





CAH



49

Rural sole community? Extra 7%
DSH/340B eligible
FTE count for IME/DME
<50 beds – HB'd RHC = cost for professional
component
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
THE END
Thank you!
David H. Snow
Hall, Render, Killian, Heath & Lyman, PC
dsnow@hallrender.com
414-721-0447
#1043923