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    CMS issues mid-build audit determinations for provider-based locations

    At long last, the Centers for Medicare and Medicaid Services (CMS) has issued decisions on provider applications for the mid-build exception. Nearly four years after the deadline for hospitals to apply for the mid-build exception to the payment policy established in the Bipartisan Budget Act of 2015 (Budget Act), CMS has issued its decisions on whether the hospitals’ under-construction off-campus outpatient departments (OPDs) met the requirements of the mid-build exception. If successful, applicant OPDs would be entitled to reimbursement under the Outpatient Prospective Payment System (OPPS) rather than the Medicare Physician Fee Schedule (MPFS).

    Background
    As a result of the Budget Act, for any new off-campus OPD, CMS announced that it would only pay OPPS rates through December 31, 2016. Effective January 1, 2017, CMS began paying new off-campus OPDs using an “applicable payment system,” usually the MPFS. The 21st Century Cures Act (Cures Act) created several new exceptions to the Budget Act’s elimination of OPPS reimbursement for new off-campus OPDs, including the mid-build exception. Under the Cures Act, a hospital with a binding written agreement with an outside, unrelated party for the actual construction of the new off-campus provider-based location as of November 2, 2015, could seek a determination that it qualified for the mid-build exception. New off-campus OPDs that qualified for the mid-build exception were eligible for OPPS reimbursement, effective January 1, 2018. To request a determination under the mid-build exception, a hospital had to file a provider-based attestation within 60 days of December 13, 2016 (date of enactment of the Cures Act), which was February 13, 2017. The new location also had to be added to the hospital’s Medicare enrollment form. Finally, the hospital was required to submit a certification from the hospital’s CEO and/or COO certifying that the hospital met the requirement of having a binding written agreement with an outside, unrelated party for the actual construction of the new off-campus provider-based location as of November 2, 2015. Pursuant to the Cures Act, CMS was required to audit each hospital that submitted an attestation and mid-build certification by December 31, 2018, to determine compliance with the mid-build exception.

    Mid-build audit determinations
    On January 19, 2021, CMS, through its auditor Cahaba, sent mid-build audit determination letters via email to all providers that had requested the mid-build exception.  Organizations that submitted a mid-build exception package in early 2017 and have not yet received the audit determination should reach out to the Medicare Administrative Contractor or auditor for assistance in obtaining the determination.

    The Cures Act made no provision for administrative or judicial review of the mid-build exception audit determinations, but hospitals are permitted to request the audit work papers supporting the audit determination and are provided with contact information to request further information. Check the auditor’s work carefully to make sure no errors were made. Organizations that believe the audit determination was made in error may want to request those audit work papers and open a line of communication with the auditor to understand the basis for the decision and ensure that all relevant documents were received and considered.

    Audit determination effects
    If your organization received a “fail” decision from the mid-build audit, you are not alone. According to a CMS fact sheet, CMS conducted audits of the 334 provider locations that requested the mid-build exception. Of those, 132 qualified and 202 failed to qualify for the exception.

    If your organization’s off-campus OPD failed to qualify for the mid-build exception and had been billing Medicare using the PO modifier, signaling to CMS that the department was an excepted off-campus OPD eligible for OPPS reimbursement, your organization likely has received an overpayment that will need to be calculated and refunded. Providers have six months to conduct their due diligence to identify the amount of the overpayment received and then 60 days to report and return the overpayment (240 days in total). CMS noted that “hospitals may be eligible for an Extended Repayment Schedule (ERS) for any overpayments per standard procedure if they meet applicable statutory and regulatory criteria.”


    This is for informational purposes only. It is not intended to be legal advice and does not create or imply an attorney-client relationship.

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