The Centers for Medicare & Medicaid Services (“CMS”) released payment policies for the new Rural Emergency Hospital (“REH”) provider type in the calendar year (“CY”) 2023 Hospital Outpatient Prospective Payment System (“OPPS”) and ASC Payment System Proposed Rule (“OPPS Proposed Rule”) published in the federal register on July 26, 2022. The proposed payment policies include an initial monthly facility fee of approximately $268,000 per month, which will adjust in future years based on a market-basket update. REHs would also get a 5 percent add-on to most outpatient payments.
The OPPS Proposed Rule also discusses quality-reporting requirements for REHs, an expedited Medicare enrollment process and REH-specific Stark Law updates. Public comments on the payments policies and other proposed policies are due September 13, 2022.
The proposed payment policies come just a few weeks after CMS released proposed regulations addressing the Conditions of Participation (“CoPs”) that a provider will need to meet to qualify as an REH. More information on the proposed CoPs is included in our prior alert available here.
Background
The Consolidated Appropriations Act, 2021 (the “Act”) signed into law on December 27, 2020, established the new REH provider type. REHs are intended to help address barriers in access to health care, particularly emergency services and other outpatient services that result from rural hospital closures. Importantly, only Critical Access Hospitals (“CAHs”) and rural hospitals with 50 beds or fewer and that were participating in Medicare as of the date the Act was signed into law can transition to REH.
REHs must furnish emergency department and observation care, and other specified outpatient medical and health services, if elected by the REH, that do not exceed an annual per-patient average length of stay of 24 hours. Hospitals may only convert to REHs if they were a CAH or rural hospital with not more than 50 beds participating in Medicare as of December 27, 2020. A CAH or hospital that converts to an REH can start participating in Medicare as an REH as early as January 1, 2023.
Importantly, however, an REH cannot provide any inpatient hospital services. REHs may only provide observation services, but must maintain an average length of stay for those of less than 24 hours. REHs may not operate swing beds but may maintain a distinct part skilled nursing facility, which will be paid under the skilled nursing facility prospective payment system.
Proposed REH Payments
5 Percent OPPS Increase
By statute, covered outpatient department services provided by REHs will be paid the OPPS rate for such services increased by 5 percent. Beneficiary copayments will still be based on the non-adjusted OPPS rate. So beneficiaries will not be charged a copayment on the additional 5 percent payment. CMS is proposing to consider all covered outpatient department services that would otherwise be paid under the OPPS as REH services.
Monthly Facility Payment
The Act required CMS to establish a monthly facility payment for REHs based on the average annual benefit experienced by CAHs in 2019 of cost reimbursement over the payment that would have been received under a prospective payment system. The OPPS Proposed Rule includes several pages describing in detail the approach CMS used to calculate the average annual benefit of CAH status. CMS ultimately proposed a monthly facility payment of $268,294 (just over $3.2 million per year) for 2023. For 2024 and subsequent years, the monthly facility payment will be the monthly facility payment for the previous year increased by the hospital market basket percentage increase.
Other Payment Policies
CMS is also proposing that REHs may provide outpatient services that are not otherwise paid under the OPPS (such as services paid under the Clinical Lab Fee Schedule) as well as post-hospital extended care services furnished in a unit of the facility that is a distinct part of the facility and licensed as a skilled nursing facility. These services, however, would not be considered REH services and therefore would be paid under the applicable fee schedule and would not receive the additional 5 percent payment increase that CMS proposes to apply to REH services.
Off-Campus Provider-Based Departments
CMS is interpreting the Act to mean that the Bipartisan Budget Act of 2015 Section 603 payment limits will not apply to items and services furnished by an off-campus PBD of an REH. That is, the so called “site-neutral” adjustment which CMS currently has set at 60%, will not apply to off-campus PBDs of an REH. As a result, items and services furnished by any off-campus PBDs that otherwise meet the definition of ‘‘REH services’’ will receive the REH services payment amount of the full OPPS payment plus 5 percent.
340B Eligibility
The proposed REH COP and payment regulations are silent on REH eligibility for the 340B program. That status is not under CMS’s purview, but rather HRSA’s. Because hospital eligibility for the 340B program is set by statute, HRSA may not have the authority to expand eligibility to REHs. Expanding the program to REHs likely requires an act of Congress.
REH Enrollment Process
In addition to meeting the above criteria and the proposed CoPs, an REH must also formally apply for enrollment in the Medicare program. CMS is proposing to update the existing provider enrollment regulations in 42 CFR Part 424, subpart P, to address enrollment requirements for REHs. Notably, CMS is proposing that a facility may submit a Form CMS-855A change of information application (rather than an initial enrollment application) in order to convert from a CAH or hospital to an REH. This is intended to speed up the enrollment process for interested CAHs and hospitals.
As described in the Act, an REH can elect to convert back to its prior designation as a CAH or a hospital.
Stark Modifications
CMS is proposing updates to the physician self-referral law (Stark Law) for the new REH provider type. Specifically, CMS is proposing (1) A new exception for ownership or investment interests in an REH; and (2) Revisions to certain existing exceptions to make them applicable to compensation arrangements to which an REH is a party. Hall Render will publish a separate article with more detail about the REH-specific Stark Law changes.
If you have questions or would like additional information about this topic, please contact:
- David Snow at (303) 801-3536 or dsnow@wp.hallrender.com;
- Lori Wink at (414) 721-0456 or lwink@wp.hallrender.com;
- Joseph Krause at (414) 721-0906 or jkrause@wp.hallrender.com;
- Benjamin Fee at (720) 282-2030 or bfee@wp.hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
