Examining the hospital outpatient PPS

Advances in Skin & Wound Care,  Sep/Oct 2000  by Simon, Karen

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On April 7, 2000, the Health Care Financing Administration (HCFA) issued the final rule that implements a prospective payment system (PPS) for hospital outpatient services furnished to Medicare beneficiaries. The effective date is August 2000. Services subject to payment under the hospital outpatient PPS include the following: surgical procedures, radiology, clinic visits, emergency department visits, diagnostic services and other diagnostic tests, partial hospitalization for the mentally ill, surgical pathology, and cancer chemotherapy.

Physical therapy services are not included as part of the outpatient hospital PPS. As such, physical therapists who perform wound care are not included in this final rule. Medicare will continue to pay for these services under the fee schedule in all settings.

The requirements a facility would need to meet in order to be considered a provider-based entity are discussed at length in the hospital outpatient PPS rule. A provider-based entity is either created by or acquired by a main provider to furnish health care services that are different from those of the main provider. The provider-based entity operates under the name, ownership, and administrative and financial control of the main provider. Examples of this could include a home health agency, skilled nursing facility, or wound care clinic. A provider-based entity must meet several requirements, including, but not limited to:

The provider-based entity and the main provider operate under the same license.

The provider-based entity is under the direct supervision of the main provider and the same employees handle the functions of billing, human resources, etc, for both entities.

The clinical services (inpatient and outpatient) of the provider-based entity and the main provider are integrated. For example, the medical records of the 2 entities are integrated into a unified retrieval system; the medical staff committee of the main provider is responsible for the quality assurance, utilization review, and related tasks of the provider-based entity; and professional staff of the provider-based entity have clinical privileges at the main provider.

The provider-based entity and the main provider are located on the same campus. (The final rule provides exceptions for this provision.)

HCFA also gives information in the rule about the ability of a provider-based entity to obtain management staff and clinical staff from management companies. This provision can have a significant impact on companies that provide wound management services under contractual arrangements.

Facilities that meet the general requirements to be a providerbased entity, but are operated under management contracts, must meet the following additional requirements:

The staff of the provider-based entity (other than management staff) must be employed by that entity or by another organization (other than the management company) that also employs the staff of the main provider.

The administrative functions of the provider-based entity must be integrated with the main provider.

The main provider has significant control over the operations of the provider-based entity.

The management contract is held by the main provider itself and not by a parent organization that controls the main provider and the provider-based entity.

To clarify the scope of the requirement on contract services, HCFA states that management staff of the provider-based entity (rather than health care or support staff) need not be employed directly by that entity. If health care and support staff of the provider-based entity are employed by an organization other than that entity or the management company, it must be the same organization that employs the staff of the main provider.

This means that companies that staff nonphysician personnel could contract with the hospital to provide services. If they do so, they have to provide staff for both the main provider (hospital) and the provider-based entity (outpatient wound clinic). If a management company is involved in providing services, it can provide the managers but not the clinical personnel.

The full impact on this rule has not yet been felt. However, many hospitals are already trying to get a delay in the implementation of this final rule.

Karen Simon,JD,is a Medicare consultant. Any information on reimbursement is provided as a service to readers but does not constitute, guarantee, or warranty that payment will be provided. Providers are responsible for case-by-case assessment of qualifications for reimbursement.

Copyright Springhouse Corporation Sep/Oct 2000
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