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August 15, 2016

OPPS 2017 – Implementation of Section 603 of the Bipartisan Budget Act of 2015

By and Amanda Beauregard

CMS recently released its proposed rule for the Hospital Outpatient Prospective Payment System (OPPS) for 2017. Among its major provisions, the proposed rule includes policies to further the implementation of Section 603 of Bipartisan Budget Act of 2015. Section 603 prohibits OPPS payment for applicable items and services furnished on or after 1/1/2017 by certain off-campus provider-based hospital outpatient departments (“Off-Campus HOPD”). As an overview, the proposed rule:

  1. Establishes the requirements by which an Off-Campus HOPD may qualify as an “excepted location,” exempt from application of the payment changes set forth in Section 603.
  2. Establishes the requirements by which certain items and services furnished by a given off-campus Off-Campus HOPD may be considered “excepted items and services” and be paid under the OPPS.
  3. Describes the applicable payment system for items and services furnished by nonexcepted Off-Campus HOPD and for items and services furnished by excepted Off-Campus HOPDs that are not covered services under the OPPS (collectively “nonexcepted items and services”).

Excepted Locations

A. On-Campus versus Off-Campus
Only Off-Campus HOPD are subject to Section 603; on-campus departments are not affected. Campus is defined by regulation as “the physical area immediately adjacent to the provider’s main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS regional office, to be part of the provider’s campus.” CMS is proposing that on-campus outpatient departments and the items and services provided by such departments be exempt from application of Section 603 and continue to be paid under the OPPS.

B. Excepted Locations (“Grandfathered Off-Campus HOPD”)
The following off-campus locations are “excepted” and, thus, are not affected by Section 603’s payment changes, provided they do not violate the relocation, change of ownership, or service expansion provisions detailed below:

  1. Any Off-Campus HOPD billing Medicare under the OPPS prior to November 2, 2015
  2. Off-Campus HOPDs located within 250 yards of an inpatient satellite

C. Relocation of Grandfathered Off-Campus HOPDs
CMS is proposing that Grandfathered Off-Campus HOPDs and the items and services that are furnished by such departments would lose the ability to be paid under OPPS if the Grandfathered Off-Campus HOPD relocates from the physical address that was listed on the provider’s CMS-855A as of 11/1/2015. In the case of addresses with multiple units, the unit number is considered part of the address, such that a Grandfathered Off-Campus HOPD could not move into another unit in its building and continue to be paid under OPPS. If a Grandfathered Off-Campus HOPD moves to a new address, the items and services provided at the new location will not be paid under OPPS.

CMS is soliciting comments on whether it should develop a relocation exception for hospitals struck by a natural disaster or experiencing extraordinary circumstances that would Grandfathered Off-Campus HOPDs to relocate in limited situations. In addition, CMS is soliciting comments on whether it should consider relocation exceptions for any other circumstances that are completely beyond the hospital’s control. It is yet to be seen whether CMS will adopt an exception for footprint growth within the same address or an exception based on the “substantially similar” test.

D. Change of Ownership of Grandfathered Off-Campus HOPD
CMS is proposing that excepted status for a Grandfathered Off-Campus HOPD will transfer to new ownership only if ownership of the entire hospital is also transferred and the associated Medicare provider agreement is accepted by the new owner.

Excepted Items and Services

A. Dedicated Emergency Department (EDs)
Section 603 of the Act applies to items and services other than items and services furnished by a dedicated ED. CMS is proposing that all services furnished in a dedicated ED, regardless of whether the ED is located on- or off-campus, and regardless of whether the services are emergent, be exempt from application of the Act and thus continue to be paid under the OPPS.

B. Clinical Family of Services
CMS is proposing that a Grandfathered Off-Campus HOPD be limited to reimbursement under the OPPS for the provision of items and services that it was furnishing as of 11/1/2015. Moreover, CMS is proposing that service types be defined by 19 clinical families of hospital outpatient service types, such that if a Grandfathered Off-Campus HOPD furnished and billed for any specific service within a clinical family of services prior to 11/2/2015, that entire clinical family of services would be excepted and be eligible to receive payment under the OPPS.

C. Service Expansion
While Grandfathered Off-Campus HOPDs will be paid at OPPS rates for only those clinical families of services furnished and billed prior to 11/2/2015, CMS is proposing that the expansion of a Grandfathered Off-Campus HOPD to provide items and services beyond those within the clinical families of services furnished and billed prior 11/2/2015 will not be paid under OPPS. Thus, if a Grandfathered Off-Campus HOPD begins to furnish services from a new clinical family of services after 11/2/2015, these new clinical families of services will not be paid under the OPPS.

Payment System for “Nonexcepted Items and Services”

To comply with Section 603, CMS intends to provide a mechanism for Off-Campus HOPDs to receive payment for “nonexcepted items and services” under an applicable payment system that is not the OPPS; however, CMS believes there is no straightforward way to do that before 1/1/2017. Accordingly, CMS is proposing a one-year temporary solution.

A. CY 2017
CMS proposes to designate the Medicare Physician Fee Schedule as the applicable payment system for the payment of the majority of “nonexcepted items and services” furnished in new Off-Campus HOPDs. Physicians furnishing “nonexcepted items and services” in these departments would be paid based on the professional claim at the “nonfacility rate,” as no separate facility payment would be made to the hospital. Alternatively, CMS proposes that a new Off-Campus HOPD could enroll as the type of freestanding provider/supplier for which it wishes to bill in order to meet the requirements of that payment system (e.g., ASC).

B. CY 2018 and Beyond
CMS is soliciting comments on regulatory and operational changes that could be made to allow an Off-Campus HOPD to bill and be paid for “nonexcepted items and services” under an applicable payment system other than the OPPS, such as the MPFS.

About the Authors

Crystal Bloom

Crystal Bloom is a partner and Chair of the firm's healthcare regulatory practice. She provides state and federal regulatory guidance and corporate legal services to healthcare providers. You can find her on LinkedIn.

Amanda Beauregard


Health Law



Research Misconduct


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