After years of buildup, the provider-based rules are finally upon us. For cost reporting periods beginning July 1, 2003, all hospitals will be required to comply fully with the provider-based rules. Thus, it is important to know those rules, which CMS has modified significantly; to appreciate the rules' impact on hospital operations and, potentially, on payment; and to consider whether the hospital should formally qualify as provider-based.

Background
On April 7, 2000, CMS (then named HCFA) issued requirements for provider-based departments and entities as part of the final rule implementing the prospective payment system for outpatient hospital services. 65 Fed. Reg. 18,433 (Apr. 7, 2000) (codified at 42 C.F.R. § 413.65). The regulation was later amended at 65 Fed. Reg. 47,670, 47,677 (Aug. 3, 2000); 66 Fed. Reg. 59,856, 59,911-14 (Nov. 30, 2001), implementing § 404 of BIPA; and 67 Fed. Reg. 49,982, 50,078-96 (Aug. 1, 2002). Most recently, CMS furnished clarification of its policies in Program Memorandum A-03-030 (Apr. 18, 2003). The current standards resemble, but differ from the prior standards embodied in Program Memorandum (PM) A-96-7 and State Operations Manual (SOM) § 2004.

Why Is Provider-based Status Important?
Provider-based status has significance for payment, coverage, and compliance.

Payment Ramifications
From the payment perspective, provider-based status historically meant that the provider-based unit could appear on the hospital's cost report and receive an allocation of the hospital's overhead costs. Given that most provider-based entities, such as hospital outpatient and distinct part units, were reimbursed under a cost-based system, this allocation was important. As more and more entities move away from cost-based payments, however, this allocation consideration is of dwindling significance. Nevertheless, provider-based status generally has a payment impact. Clinic services furnished in a non-provider setting, for example, are generally reimbursed under the physician fee schedule (employing the higher practice expense). Those same services furnished in a provider-based setting are reimbursed to the hospital under the APC payment methodology of outpatient PPS, with the physician receiving a reduced physician fee schedule payment as a result of the lower practice expense (i.e, the site-of-service differential). The hospital APC payment combined with the lower physician fee schedule payment is typically more than what would be paid were the services furnished in the clinic setting. This is not the case, however, for all services. For example, for certain imaging procedures, such as MRI and PET scans, the "freestanding" reimbursement currently exceeds provider-based payment.

Coverage Ramifications
From the coverage perspective, certain services must be furnished in a particular setting in order to be covered. For example, partial hospitalization services must be furnished in a certified Community Mental Health Center (CMHC) or a hospital in order to be covered.

Compliance Considerations
There have been cases in which providers' alleged failures to satisfy provider-based criteria have given rise to fraud and abuse charges. As rules become more settled, other cases can be expected, with the government contending that providers knew or should have known the rules.

To Whom Do the Rules Apply?
General Rule
The rules apply to: (i) provider-based entities (such as rural health clinics), which provide services that are different from those of the main provider; (ii) departments of a hospital (a department comprises both the physical facility and the personnel and equipment needed to deliver the services and is defined as a facility or organization that provides the same type of services as furnished by the main hospital); (iii) remote locations of a hospital, such as an inpatient facility for specialty services located many miles away from the main provider (Medicare conditions of participation do not apply to remote locations as independent entities); and (iv) satellite facilities as defined elsewhere in the Medicare regulations (42 C.F.R. §§ 412.25(h)(i) and 412.25(e)(i)).

Multi-campus Hospitals
Multi-campus hospitals must meet the provider-based criteria, with one campus being designated as the "main provider." The remaining campuses are remote locations.

If No Payment Effect
Where provider-based versus freestanding status has no payment ramifications and does not affect beneficiary liability, CMS will not apply the provider-based rules and will not make a status determination. CMS has instructed its Regional Offices not to make provider-based determinations for: Ambulatory Surgery Centers (ASCs); Comprehensive Outpatient Rehabilitation Facilities (CORFs); Home Health Agencies (HHAs); Skilled Nursing Facilities (SNFs); hospices; inpatient rehabilitation units excluded from acute care PPS; independent diagnostic testing facilities (IDTFs) furnishing only services paid under a fee schedule (e.g., screening mammography), facilities that furnish only clinical diagnostic laboratory tests, and facilities that furnish only some combination of the two; ambulances; and departments of providers that furnish no service of a type for which separate payment would be made by Medicare (e.g., laundry and medical records departments). 42 C.F.R. § 413.65(a). CMS has said also that it will not require provider-based recognition of facilities (other than CAHs) that furnish only outpatient physical, occupational, and speech therapy as long as the $1,500 annual cap on those services is suspended. The caps went into effect September 1, 2003. 42 C.F.R. § 413.65(a).

End Stage Renal Disease (ESRD) Facilities
ESRD facilities do not have to meet the requirements of 42 C.F.R. § 413.65. They must satisfy, however, the more limited hospital-based provisions of 42 C.F.R. § 413.174(c) if they wish to be paid the hospital-based rate.

Exception for FQHCs and "Look Alikes"
A facility does not have to satisfy the provider-based criteria if: (1) (i) on or before April 7, 2000, it received a § 330 Public Health Service Act grant or is receiving funding from such a grant under a contract with the grant's recipient and meets the requirements to receive such a grant, or, (ii) based on a recommendation from PHS, was determined by CMS on or before April 7, 2000, to meet the requirement for receiving such a grant; and (2) since April 7, 1995, it furnished only services that were billed as if they had been furnished by a department of the provider.

What are the Regulation's Effective Dates?
General Rule
Section 404 of BIPA grandfathered, until October 1, 2002, all sites treated as provider-based as of October 1, 2000. CMS extended grandfathering so that it does not expire until the beginning of a hospital's cost reporting period on or after July 1, 2003. 42 C.F.R. § 413.65(b)(2). CMS has stated that if a site was paid as provider-based, it qualifies for this grandfathering, even if it received no formal CMS approval as provider-based.

Grandfather Provision - What Was Not Further Delayed?
Section 404 does not delay all of the provider-based rules for grandfathered facilities. Notably, the provider-based rules applicable to EMTALA (42 C.F.R. § 489.24 (b) and (i)) and to the obligations of provider-based entities (42 C.F.R. § 413.65(g)) became effective on the first day of the hospital's cost reporting period beginning on or after January 10, 2001. Similarly, the rules regarding physician supervision were not delayed.

Facilities that Are Not Grandfathered
Facilities and organizations that were not grandfathered were required to meet all provider-based requirements and obligations effective with the first day of the facility's cost reporting period beginning on or after January 10, 2001.

Distinction Between On-campus and Off-campus Sites
In the August 2002 changes to the provider-based regulations, CMS made important distinctions between on-campus and off-campus sites, reducing the burdens on on-campus sites. As a result, the definition of campus now has elevated importance. CMS defines campus in part, 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." 42 C.F.R. § 413.65(a)(2). Through this definition, CMS has provided a fairly clear standard (250 yards from main buildings), but the agency has also stated that this standard is not absolute and that CMS's regional offices will be given the discretion to allow other locations that are beyond 250 yards to qualify as "on-campus." Hence, it will be most important for providers with locations that do not meet the 250-yard test but that are "close to the line" to seek guidance from their regional offices.

Standards Applicable to On-campus Locations
The provider-based regulation requires provider-based entities to satisfy all of the ffollowing requirements:

Licensure

Departments of the provider, remote locations of a hospital, and satellite facilities must be operated under the same license as the main provider, except in areas where the state requires a separate license for the site. If the state does not permit licensure for the particular type of facility together with the main provider, CMS will not require that the licensure standard be met.
"Same license" requirement is not applicable to "entities," such as HHAs, SNFs, and CORFs, which are separately licensed, or to FQHCs and RHCs.
If a state health facilities' cost review commission or other agency that has authority to regulate the rates charged by hospitals or other providers in a state "finds that a particular facility or organization is not part of a provider," CMS will determine that the facility or organization does not have provider-based status. 42 C.F.R. § 413.65(d)(1). This is applicable primarily to Maryland hospitals.
Although accreditation as part of the hospital is required for provider-based status under SOM § 2004 and PM A-96-7, this requirement was dropped in the regulation.

Clinical Integration

The professional staff of the facility or organization must have staff privileges at the main provider.
The main provider must maintain the same monitoring and oversight of the facility or organization as it does for any other department of the provider.
The medical director of the facility or organization seeking provider-based status must maintain a reporting relationship with the Chief Medical Officer or other similar official of the main provider, and that relationship must have the same frequency, intensity, and level of accountability that exists in the relationship between the medical director of a department of the main provider and the Chief Medical Officer or other similar official of the main provider. The medical director of the facility or organization seeking provider-based status must be under the same type of supervision and accountability as any other director, medical or otherwise, of the main provider.
Medical staff committees or other professional committees at the main provider must be responsible for medical activities in the facility or organization, including quality assurance, utilization review, and coordination and integration of services (to the extent practicable) between the facility or organization seeking provider-based status and the main provider.
Medical records for patients treated in the facility or organization will be integrated into a unified retrieval system (or cross reference) of the main provider. What this means is that those professionals practicing at either the main provider or the provider-based site must be able to "obtain relevant medical information about care in the other setting." 65 Fed. Reg. 18,515.
Inpatient and outpatient services of the facility or organization and the main provider must be integrated, and patients treated at the facility or organization who require further care must have full access to all services of the main provider and be referred where appropriate to the corresponding inpatient or outpatient department or service of the main provider. CMS may look at frequency of referrals from inpatient to outpatient facilities and vice versa.

Financial Integration

The financial operations of the facility or organization must be fully integrated within the financial system of the main provider, as evidenced by shared income and expenses between the main provider and the facility or organization.
The costs of the facility or organization must be reported in a cost center (or for non-hospital departments, in the appropriate cost center or cost centers) of the provider, and the financial status of the facility or organization must be incorporated and readily identified in the main provider's trial balance.

Public Awareness

The facility or organization seeking status as a department of a provider, remote location, or satellite facility must be held out to the public and other payers as part of the main provider.
The name of the site should include the name of the hospital. How much the names must match is open to question. In the case of Johns Hopkins Hospital, for example, CMS rejected a provider-based entity's application because it was named "Johns Hopkins at Greenspring" and not "Johns Hopkins Hospital at Greenspring." The Departmental Appeals Board, however, rejected that position. Johns Hopkins Health System v. HCFA, DAB Ap. Div. Dec. No. 1712, Medicare & Medicaid Guide (CCH) § 120,119 (Dec. 12, 1999).
All information (advertisements, signs, web-sites, patient registration forms, letterhead) should reflect that the site is part of the hospital. If the hospital and health system have different names, the provider-based location should use the hospital name. CMS has said that it is not sufficient for advertisements to show that the site is part of, or affiliated with, the provider's network or health care system.
When patients enter the provider-based facility or organization, they must be aware that they are entering the main provider and will be billed accordingly. This does not mean, however, that a facility must bill all patients as though the facility were provider-based (but all Medicare patients must be billed by the facility to reflect the provider-based status of the site).

Standards Applicable to Off-campus Locations
Off-campus sites must satisfy all of the requirements applicable to on-campus sites. In addition, off-campus sites must satisfy standards relating to ownership, administration and supervision, and proximity.

Operation Under Ownership and Control of the Main Provider
The business enterprise that constitutes the facility or organization must be 100 percent owned by the provider.

The main provider and the facility or organization seeking status as a department of the provider, remote location, or satellite facility must have the same governing body.
The facility or organization seeking status as a department, remote location, or satellite must be operated under the same organizational documents as the main provider. For example, the facility or organization seeking provider-based status must be subject to common bylaws and operating decisions of the governing body of the provider where it is based.
The main provider must have final responsibility for administrative decisions, final approval for contracts with outside parties, final approval for personnel actions, final responsibility for personnel policies (such as fringe benefits/code of conduct), and final approval for medical staff appointments in the facility or organization.
Note that CMS has said that "common control of two separate entities by the same parent organization ...[is not] sufficient to meet a requirement for ownership and control by the main provider." 65 Fed. Reg. 18,514. This is consistent with the practice of a number of regional offices over the past several years.
The ownership requirement applies to the business enterprise; physical assets do not have to be owned and may be leased. 65 Fed. Reg. 18,514.

Administration and Supervision
The reporting relationship between the facility or organization seeking provider-based status and the main provider does not have to be daily, but it must have the same frequency, intensity, and level of accountability that exists in the relationship between the main provider and one of its departments. Specifically:

The facility or organization must be under the direct supervision of the main provider.
The facility or organization must be operated under the same monitoring and oversight by the provider as any other department of the provider, and it must be operated just as any other department of the provider with regard to supervision and accountability. The facility or organization director or individual responsible for daily operations at the entity must:
- Maintain a reporting relationship with a manager at the main provider that has the same frequency, intensity, and level of accountability that exists in the relationship between the main provider and its departments (organization chart should support this); and
- Be accountable to the governing body of the main provider in the same manner as any department head of the provider.
Administrative functions - billing services, records, human resources, payroll, employee benefits package, salary structure, and purchasing services - of the facility or organization must be integrated with those of the provider where the facility or organization is based. The same employees or group of employees must handle these administrative functions for the facility or organization and the main provider. Alternatively, the administrative functions for both the facility or organization and the entity must be:
- Contracted out under the same contract; or
- Handled under different contracts, with the contract of the facility or organization being managed by the main provider.

Note that while the discussion regarding administrative integration suggests that employees must be W-2 employees, CMS has said that the regulations "do not explicitly prohibit the use of leased employees." 65 Fed. Reg. 18,511.

Location in Immediate Vicinity

The facility or organization must be located not more than 35 miles from the main campus of the hospital or critical access hospital. Distance is determined using straight-line distance, not road miles.
Alternatively, the facility or organization must demonstrate a high level of integration with the main provider by showing that it meets all of the other provider-based criteria and by demonstrating that it serves the same patient population as the main provider. It must do this by submitting records showing that, during the 12-month period immediately preceding the first day of the month in which the application for provider-based status is filed with CMS and for each subsequent 12-month period:
- At least 75 percent of the patients served by the facility or organization reside in the same zip code areas as at least 75 percent of the patients served by the main provider;
- At least 75 percent of the patients served by the facility or organization who required the type of care furnished by the main provider received that care from that provider (for example, at least 75 percent of the patients of an RHC seeking provider-based status received inpatient hospital services from the hospital that is the main provider); or
- If the facility or organization is unable to meet the criteria of a or b above because it was not in operation during all of the 12-month period described, the entity must show that the facility or organization is located in a zip code area among those that accounted for at least 75 percent of the patients served by the main provider during all of the 12-month period described.
A facility or organization is not considered to be in the "immediate vicinity" of the main provider unless the facility or organization and the main provider are located in the same state or, where consistent with the laws of both states, adjacent states.
Facilities are deemed to comply with the "immediate vicinity" requirement if the main provider has a disproportionate share adjustment percentage greater than 11.75 percent or is described in 42 C.F.R. § 412.106 (c)(2) (urban hospital with more than 100 beds and more than 30 percent of inpatient revenue is from state and local government payments for indigent care) and is: (1) a government-owned or -operated hospital; (2) a public or private nonprofit corporation that is formally granted governmental powers by a unit of state or local government; or (3) a private hospital that has a contract with a state or local government that includes the operation of clinics located off the main campus of the hospital to ensure access in a well-defined service area to health care services for low-income individuals who are not entitled to Medicare or Medicaid.
Rural Health Clinic Exception - A rural health clinic that is otherwise qualified as a provider-based entity of a hospital that is located in a rural area, as defined in Medicare regulations at 42 C.F.R. § 412.62(f)(1)(iii), and has fewer than 50 beds, as determine under 42 C.F.R. § 412.105(b), is not subject to the immediate vicinity criterion.

Additional Requirements ("Obligations")
EMTALA
Hospital outpatient departments (not SNFs or other non-hospital entities), if located on the main premises of the hospital, must comply with the anti-dumping rules. CMS has eliminated EMTALA's applicability to off-campus locations that are not "dedicated emergency departments." The EMTALA rules continue to apply, however, to dedicated emergency departments located "off the main hospital campus." 42 C.F.R. § 489.24(b).

Site of Service
Physician services furnished in hospital outpatient departments or hospital-based entities (other than RHCs) must be billed with the correct site-of-service indicator, so that applicable site-of-service reductions to physician and practitioner payment amounts can be applied. CMS expects hospitals to monitor physicians who practice in the hospital, including off-site departments, to ensure proper billing using the correct site-of-service indicator. 65 Fed. Reg. 18,519. On line 24b of the CMS 1500 form, therefore, the physician should record "22" for the hospital outpatient setting or "23" for the hospital emergency room rather than "11" for office setting.

Provider Agreement
Hospital outpatient departments must comply with all the terms of the hospital's provider agreement.

Nondiscrimination
Physicians who work in hospital outpatient departments or hospital-based entities are obligated to comply with the non-discrimination provisions of Title XVIII.

Billing of Medicare Patients

Hospital outpatient departments (other than RHCs) must treat all Medicare patients as hospital outpatients for billing purposes. In other words, the hospital must bill a facility charge to Medicare beneficiaries. The department must not treat some Medicare patients as hospital outpatients and others as physician office patients.
The uniformity-in-billing requirement applies only to the billing of Medicare patients. Hospitals may "bill other payers in whatever manner is appropriate under those payers' rules." 65 Fed. Reg. 18,519. Thus, the hospital generally must furnish a "split bill" when billing Medicare for Medicare-covered patients (that is, bill the professional component to the Medicare carrier using the CMS 1500, while billing the facility overhead and technical component to the Medicare intermediary using the UB-92), but it need not split bill private or managed care payers. Often, these payers do not recognize split billing for clinic services, whether or not the clinic is hospital-based, and they will pay a physician fee schedule amount irrespective of the site of service.
Complying with the uniformity in billing requirement can get tricky if the outpatient department shares space with another entity, such as a non-provider clinic. CMS has suggested that this can be done, but said that the regional offices will have to look at the fact pattern of each case. 65 Fed. Reg. 18,515. The space-sharing agreement, if it is to be approved, presumably will have to delineate the specific times that the space is considered to be provider-based and make clear that the space satisfies all provider-based criteria during those times. Sharing of the same space at the same time will run afoul of requirements such as those relating to public awareness.

Payment Window
In the case of a patient admitted to the hospital as an inpatient after receiving treatment in the hospital outpatient department or hospital-based entity, payments for services in the hospital outpatient department or hospital-based entity are subject to the payment window provisions applicable to PPS hospitals and to hospitals and units excluded from acute-care PPS.

Informing Beneficiaries (Off-campus Only)

When a Medicare beneficiary is treated in a hospital outpatient department or hospital-based entity (other than an RHC) that is not located on the main provider's campus, the hospital must inform the beneficiary, in writing and prior to the delivery of services, of the beneficiary's potential financial liability, including coinsurance liability for both the hospital outpatient visit and the physician services. The notice must be one that the patient can read and understand. If the beneficiary is unconscious, under great duress, unable to read, or for any other reason unable to read a written notice and understand and act on his or her rights, the written notice must be provided, prior to the delivery of services, to the beneficiary's authorized representative.
CMS has interpreted this to mean that the hospital must inform the beneficiary not just of the fact that there will be a liability, but also the amount of this liability. CMS has recognized, however, that determining the patient's exact liability may be difficult at times, such as when the treating physician is in the process of diagnosing the patient's condition and is unsure of what services might be ordered. Under such circumstances where the exact type or extent of care is unknown, CMS has said that the hospital may inform the beneficiary that there will be a coinsurance liability that he or she would not incur if the facility were not provider-based.
The hospital may furnish an estimate based on typical or average charges for visits to the facility but at the same time state that the patient's actual liability will depend upon the services actually furnished.
In an EMTALA setting, notice of beneficiary liability should be given as soon as possible after the existence of the emergency has been ruled out or the patient has been stabilized.

Health and Safety
Hospital outpatient departments must meet applicable hospital health and safety rules for Medicare participating hospitals.

Physician Supervision of "Incident to" Services and Supplies (42 C.F.R. § 410.27) (Off-campus Only)
Services and supplies furnished at a location (other than an RHC or FQHC) that CMS designates as a hospital department must be under the direct supervision of a physician. Direct supervision means that the physician must be present on the premises and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed. CMS will assume that direct supervision exists if the outpatient department is located on the hospital campus, but the assumption does not extend to departments located at off-campus sites. How this applies to multi-campus hospitals is unknown. CMS has said that "any facility not located on a hospital's main campus would be considered to be an 'off-campus' facility." 67 Fed. Reg. at 50,082. This requirement raises a number of questions. What does the direct supervision requirement mean when read in conjunction with this Federal Register language? If in a multi-campus situation whole remote locations are considered to be off-campus, must direct supervision be demonstrated for all outpatient services? What about services and tests for which only general supervision is required?

Special Rules for Joint Ventures and Management Contracts
CMS has created special rules for management contracts and joint ventures, which again turn on whether the site is on or off the campus of the main provider.

Joint Ventures
In order for a facility or organization to operate as a joint venture, it must: (1) be partially owned by at least one provider; (2) be located on the main campus of at least one of the partial owner providers; (3) be provider-based to the main provider on whose campus it is located (even if a minority owner); and (4) meet all other provider-based requirements. Thus, joint ventures are permitted for on-campus locations, and the services they furnish will be billed using the provider number of the main provider. Note that a joint venture with physicians will present Stark issues. Note as well that, in order for the services furnished by the joint venture to be provider-based, the clinical integration requirement will mandate that the provider have complete control over many elements of the joint venture. Additionally, the public awareness criterion will require signage to designate the site as part of the main provider.

Management Contracts

Management contracts for on-campus sites are permissible. Off-campus locations operated under management contracts, however, are considered provider-based only if they meet all of the following criteria:
- The staff of the facility or organization, other than management staff and staff providing services paid under the physician fee schedule, are employed by the provider (or by another organization, other than the management company, which also employs the staff of the main provider). Other than staff paid under the physician fee schedule, the main provider may not utilize the services of leased employees that are directly involved in the furnishing of patient care.
- The administrative functions of the facility or organization are integrated with those of the main provider (see discussion of "Administration and Supervision" above).
- The main provider has significant control over the operations of the facility or organization (see discussion of "Administration and Supervision" above).
- The management contract is held by the main provider itself, not by a parent organization that has control over both the main provider and the facility or organization.
To conform to these requirements, it is advisable that the management contract state that the provider has ultimate control over the facility or organization; that all decisions and policies of the contractor are subject to hospital review and approval; that all personnel, whether employed by the hospital or by the contractor, be required to comply with the hospital policies and rules; and that the contractor must periodically report in writing to the hospital. In addition, the agreement should plainly delineate who constitute "management employees," and these individuals should have job descriptions consistent with that label.
Often the management contract provides for the furnishing of services also available through the main provider (e.g., billing services, computer services, accounting services, general administrative staff services). To the extent the main provider can identify such like costs, it must carve out those costs to ensure that they are not allocated to the department or provider-based entity. 42 C.F.R. § 413.24(d)(6). If the main provider is unable to identify the like costs, the costs of services purchased through the management contract must be reclassified to the main provider's administrative and general cost center and allocated down to all reimbursable and non-reimbursable cost centers.

Under Arrangements
The Medicare statute at 42 U.S.C. § 1395x(w)(1) recognizes that a hospital may bill for services furnished at non-hospital locations if the services are furnished "under arrangements." See also 42 U.S.C. § 1395x(s)(2)(C). CMS recognized this in the preamble to its regulation, stating the provider-based rule will not prevent providers from furnishing "selective services" under arrangement. 65 Fed. Reg. 18,518. CMS went on to provide, however, that a facility or organization may not qualify for provider-based status if all services furnished by the facility are furnished under arrangement. CMS has not been clear about whether certain specific services might run afoul of this bar, particularly if the service furnished under arrangement may essentially amount to the entire hospital department. For example, if the hospital obtains all of its lithotripsy services, MRI procedures, hyperbaric oxygen or other specialty services under arrangements, is the bar implicated? CMS has not formally answered that question, although it has suggested it might allow those services to be furnished under arrangement.

Application to Medicaid
In the preamble to the final provider-based regulations, CMS stated that since "hospitals under Medicaid are required to meet the same standards as Medicare facilities, these final rules would affect the Medicaid definition of these facilities as well as the Medicare definitions." 65 Fed. Reg. 18,506. CMS has said, however, that while facilities or organizations that are not provider-based have to meet the service standards that apply to freestanding entities of their type, states have considerable flexibility to determine appropriate payment rates in their state Medicaid plans. CMS has also said that states may adopt higher payment rates for services at those freestanding entities to reflect special circumstances, which payment rates could include higher cost structures due to affiliation with a provider. Thus, a state could pay a site as provider-based even if Medicare does not. In order to do this, however, the state must provide for such payment in its state plan. See 67 Fed. Reg. 50,083.

Approval Process
Unlike under past rules, formal CMS approval is no longer required for on-campus or off-campus sites as a condition of billing and payment. CMS, however, will consider applications, which it terms "attestations," and will approve or reject them. Providers should seriously consider seeking approval, the benefit of which is to limit the risk of retrospective recoveries if CMS subsequently determines that the site is not provider-based. If a site does not have approval and has been billing for services as provider-based, CMS will recover the excess payments for the entire period subject to reopening. The risk associated with such a recovery may be minimal for most on-campus sites, but this is not necessarily the case for off-campus sites. CMS has a regulatory presumption that an off-site clinic is a freestanding location. 42 C.F.R. § 413.65(b)(4). Thus, if the site is not provider-based, it would be paid under the physician fee schedule.

The attestation process differs depending on whether the site is on-campus or off-campus. If the site is on-campus, the provider need not submit supporting documentation, but if the site is off-campus, the provider must submit documentation together with the attestation. Even for on-campus locations, however, the submission of supporting documentation may be advisable. As part of PM A-03-030, CMS issued a sample attestation format that may be employed.

Attestation may be submitted for the whole site or, if the location houses both provider-based and freestanding locations, for a portion of a site. A single attestation may cover multiple facilities (or cost centers). Documentation, if submitted, and provider statements must be sufficiently specific to address each facility (or cost center). Thus, a one-size-fits-all attestation will not easily work, particularly for off-campus sites.

The attestation is filed with the fiscal intermediary and the regional office. The regional office has the authority to approve or reject the attestation. CMS has said only that it will act "promptly." There is no deadline for CMS acting on attestations.

CMS will request additional information if the attestation appears incomplete or if it otherwise has questions.

CMS approval is binding absent material changes. CMS has not defined material change but has given the example of entering into a management contract.