July 2018
Hospitals with off-campus provider-based departments (“PBDs”) under construction (or “mid-build”) at the time of the Bipartisan Budget Act of 2015 – which limited Medicare payment to off-campus provider-based departments that were not operational prior to November 2, 2015– have been waiting years for Medicare to confirm the provider-based status of these locations. With mid-build audits underway, it appears hospitals are one step closer to that goal.

Under the “mid-build” exception, an off-campus PBD is exempt from the Medicare payment limitation if the main provider (1) had a binding written agreement with an “outside unrelated party for the actual construction” of the PBD before November 2, 2015; and (2) submitted a written certification of its mid-build status, signed by its Chief Executive Officer or Chief Operating Officer, to the Medicare Administrative Contractor by February 13, 2017. By statute, CMS must audit compliance with the mid-build requirement by no later than December 31, 2018.

Those audits have begun to move forward; as the first line of business, Medicare contractors are requesting a copy of the binding written agreement for the off-campus PBDs of interest. While this may be straightforward in some instances (e.g., a single construction contract), in others it may require multiple contracts and additional explanation (e.g., leased hospital space built-out to PBD specifications). The extent to which contractors will entertain back-and-forth dialogue during these audits is unclear, but given the lack of appeal rights afforded to mid-build applicants, it is important for hospitals to respond promptly and thoroughly.

For assistance responding to an audit request, or if you have questions regarding this topic, please contact the authors or your Polsinelli advisor.