Provider-Based Entities

The Health Care Financing Administration ("HCFA") recently clarified its policy regarding provider-based designations. The policy sets forth standards by which multiple provider facilities will be designated as one facility for Medicare accounting and cost allocation purposes. Hospitals frequently request provider-based status as they build integrated delivery systems. The designation allows hospitals to bill for skilled nursing facilities, home health agencies, rural health care clinics and physician's clinics as outpatient departments of the hospital. HCFA is concerned that the provider-based designation could result in higher payments to facilities that may not be entitled to them. Under the clarified policy, for an entity to be designated as part of the provider for payment purposes, the following requirements must be met:

1. The entity must be physically located in close proximity to the provider where it is based, and both facilities must serve the same patient population.
2. The entity must be an integral and subordinate part of the provider where it is based, and it must be operated under common licensure (unless separate licenses are required by law).
3. The entity must be included under the accreditation of the provider where it is based (if the provider is accredited by a national accrediting body).
4. The entity must be operated under the common ownership and control of the provider.
5. The entity director must be under direct, daily supervision of the provider where it is based.
6. Clinical services of the entity and the provider must be integrated.
7. The entity must be held out to the public as part of the provider where it is based.
8. The entity and the provider must be financially integrated.

HCFA acknowledges that its new policy "may result in identification of previous provider-based

decisions that would not be accordance with the criteria described" in the new policy. In such cases, HCFA's regional offices can take corrective action, which will be applied prospectively. If you are concerned about your provider-based designation, please contact your Broad and Cassel health care attorney.