Experience. Integrity. Advocacy.
Experience. Integrity. Advocacy.

OIG Recommends Ending Provider-Based Facility Payments


The Office of Inspector general is recommending that the Centers for Medicare and Medicaid Services (CMS) eliminate the “provider-based facility” place of service designation because there is no reliable way to track or audit payments or potential overpayments.

Under the Medicare program, payments for services performed in provider-based facilities are as much as 50 percent higher than payments for the same services performed in freestanding facilities (such as a doctor’s offices or clinics). To be considered “provider-based,” a facility must be owned by and integrated with a hospital, must be either on or off the main hospital campus, and must meet certain requirements such as operating under the same license as the hospital. Hospitals may voluntarily attest to meeting the requirements, though they are not mandated to do so.

The Bipartisan Budget Act of 2015 eliminated higher payment for new off-campus provider-based facilities, though existing off-campus, as well as existing and new on-campus, facilities were grandfathered in and continue to receive higher payment.

Under the OIG’s recommendations, the “provider-based facility” designation would be eliminated. Alternately, the Medicare Payment Advisory Commission has recommended that similar services be paid at the same rate regardless of whether they are provided in hospital outpatient departments or physician offices.

One of the main reasons the OIG is making these recommendations is their discovery of certain vulnerabilities in the provider-based facility payment process. First, CMS cannot distinguish between on- and off-campus provider-based billing in its aggregate claims data to ensure appropriate payment. Second, regardless of whether they voluntarily attest, hospitals must meet specific requirements to receive higher provider-based payments. However, the OIG found on review that more than three quarters of 50 hospitals that had not voluntarily attested actually did own off-campus facilities that did not meet at least one requirement. This means the majority of these facilities (and others) may be improperly billing Medicare and its beneficiaries, and therefore receiving overpayments.

While the OIG acknowledged that CMS is attempting to improve its oversight of provider-based facilities, it continues to recommend eliminating the provider-based distinction or equalizing payments for the same provider services regardless of place of service. These recommendations are made not only because of the vulnerabilities identified, but also because of the lack of evidence that “services in provider-based facilities deliver benefits that justify the additional costs to Medicare and its beneficiaries.”

If CMS chooses not to implement these measures, the OIG has made the following recommendations in order for CMS to properly oversee the provider-based facility payments:

  • implement systems and methods to monitor billing by all provider-based facilities,
  • require hospitals to submit attestations for all their provider-based facilities,
  • ensure that regional offices and MACs apply provider-based requirements appropriately when conducting attestation reviews, and
  • take appropriate action against hospitals and their off-campus provider-based facilities that were identified as not meeting requirements.

While CMS concurred with the third and fourth recommendations, they did not concur with the second and only partially concurred with the first.

For more information, review the OIG’s June 2016 report, “CMS Is Taking Steps to Improve Oversight of Provider-Based Facilities, but Vulnerabilities Remain.”

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Charity Singleton Craig

Charity Singleton Craig is a freelance writer and editor who provides communications and marketing services for CIPROMS. She is responsible for creating, editing, and managing all content, design, and interaction on the company website and social media channels in order to promote CIPROMS as a thought leader in healthcare billing and management.

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