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COVID-19’s Impact on Provider-Based Departments

The one constant in healthcare is change, and the COVID-19 public health emergency (PHE) brought rapid change to how and where hospitals deliver services to patients. Healthcare entities may have relocated or temporarily shifted provider-based departments (PBDs) to provide flexibility for patient care purposes. When the PHE ends (and the associated 1,135 waivers), will your organization still have a solid physical inventory of all your hospital spaces and PBDs? Do those temporary relocations become permanent changes? Will the new location become “non-excepted” and affect reimbursement? Who in your organization is providing oversight and a road map for these changes? Does your organization’s leadership have a master list of each provider-based location? If you answered yes to any of these questions, continue reading, as the discussion will focus on important considerations to Medicare’s requirements for PBDs considering the COVID-19 pandemic.

Understanding PBDs

PBDs are defined under 42 C.F.R. § 413.65(a)(2) as facilities or organizations “either created by, or acquired by, a main provider for the purpose of furnishing healthcare services of the same type as those furnished by the main provider under the name, ownership, and financial and administrative control of the main provider.” Also under it, campus is defined as the “physical area immediately adjacent to the provider’s main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS [Centers for Medicare & Medicaid Services] regional office, to be part of the provider’s campus.” These two definitions are vital to understanding how the changes shape facilities and organizations alike. PBDs can either be on or off the main provider’s campus. The provider-based status is a Medicare payment designation that was established by the Social Security Act permitting healthcare facilities to bill Medicare as a hospital outpatient department. Therefore, it is important that hospitals adhere to Medicare’s provider-based requirements. The provider-based requirements are categorized as:

  • Licensure: The department/facility in question may operate under the same license as the main provider unless state law requires the department/facility to have a separate license. Is the location associated with the main provider’s form CMS-855A (“Medicare Enrollment Application - Institutional Providers”)?
  • Clinical services: The department/facility must be clinically integrated with the main provider. Does the main provider have monitoring and/or oversight authority of the department/facility as it would with any other department of the main provider?
  • Financial integration: The department/facility must be wholly integrated with the main provider from a financial standpoint. For example, does the department/facility share income and expenses with the main provider?
  • Public awareness: The department/facility must be held out to the public as part of the main provider. When patients visit the department/facility, do they know they are in a facility that is part of the main provider? Also, do patient bills and wall signage affirm that the patient is receiving care from the main provider?
  • Hospital obligations: There are many hospital obligations that must be met before obtaining provider-based status. Does the department/facility satisfy the hospital outpatient department requirements? Do the physicians within the department/facility comply with the nondiscrimination requirements, as outlined in 42 C.F.R. § 489.10(b) ?

In addition to the requirements explained above, off-campus departments/facilities must also adhere to the following requirements:

  • Operate under the ownership and control of the main provider:
    • Is the facility exclusively owned by the main provider?
  • Maintain administration and supervision integration:
    • Does the department/facility share the same reporting relationship as the main provider such that it is accountable to the governing body of the main provider in the same manner as any department head of the provider?
  • Location:
    • Is the department/facility located within a 35-mile radius of the hospital campus?
    • Is the department/facility owned and operated by a hospital that has a disproportionate share adjustment greater than 11.75%, as described in 42 C.F.R. § 412.106(c)(2)?[1]
    • Does the department/facility demonstrate a high level of integration with the main provider such that it meets all the other provider-based criteria and demonstrates that it serves the same patient population as the main provider, by submitting records that show the integration during the 12-month period immediately preceding the first day of the month in which the application for provider-based status is filed with CMS?

For the comprehensive listing of all provider-based requirements, review the full regulations at 42 C.F.R. § 413.65 .

The COVID-19 Outbreak

In the early months of 2020, a novel respiratory virus known as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) swept the world and caused widespread infection that would be later named COVID-19. The World Health Organization declared the global COVID-19 outbreak a PHE in January 2020; by March 2020, the president of the United States also declared a national state of emergency.[2]

As the nation grappled with COVID-19 management, healthcare organizations shifted to what had quickly become their new normal: cessation of elective procedures, full intensive care units, limited medical supplies, and medical staff burnout. This spurred the need for regulatory agencies to revise existing policies and guidance. Namely, CMS amended its extraordinary circumstances relocation policy for PBDs, which sought to ease the burden on hospitals, improve access to patient care, and simplify the provision of healthcare.[3]

1135 Waivers to Combat COVID-19

Under Section 1135 of the Social Security Act, the Secretary of the U.S. Department of Health & Human Services has the authority to temporarily waive certain Medicare, Medicaid, Children’s Health Insurance Program, or Health Insurance Portability and Accountability Act requirements. This is known as blanket 1135 waivers. The Department of Health & Human Services secretary used that authority to waive certain administrative requirements to increase access to medical services during the national emergency. As a result, CMS waived certain provider-based rules outlined in 42 C.F.R. § 413.65 .[4] These blanket 1135 waivers gave hospitals the flexibility to respond to the COVID-19 pandemic thanks to expanded access to care. They also simplified the provision of healthcare during a national crisis overall. In addition to the waiver pertaining to provider-based requirements, CMS also waived some Medicare conditions of participation requirements under 42 C.F.R. § 482.41 and 42 C.F.R. § 485.623 . The COVID-19–related blanket waivers have a retroactive effective date of March 1, 2020, and will remain in effect through the end of the PHE declaration.

PBD Reimbursements

Section 603 of the Bipartisan Budget Act of 2015 addressed off-campus PBDs that were not billed as a hospital department as of November 2, 2015.[5] It was later distinguished that on-campus and certain off-campus PBDs established and billing Medicare prior to November 2, 2015, were considered as excepted and paid under the outpatient prospective payment system (OPPS). Conversely, off-campus PBDs established on or after November 2, 2015, are considered nonexcepted for payment purposes and are therefore paid “under the applicable payment system,” which CMS defines as the Medicare Physician Fee Schedule (MPFS) rate plus a relativity adjustment.[6] In other words, effective January 1, 2017, nonexcepted facilities are paid 40% of the OPPS payment amount. CMS established that excepted on-campus PBDs that relocate off-campus would be considered nonexcepted after relocating and therefore be paid under the new MPFS rate.[7] The same is true for excepted off-campus PBDs that relocate, as defined in 42 C.F.R. § 419.48(a)(2) . In 2017, CMS issued a final rule that would allow excepted off-campus PBDs to relocate, temporarily or permanently, without losing their excepted status, for extraordinary circumstances.[8] In light of the COVID-19–created PHE, CMS implemented 1135 waivers that would be in effect for the duration of the emergency.

Relocation of PBDs to Manage COVID-19

Subsequently, in May 2020, CMS published a second interim final rule in which hospitals were permitted to temporarily relocate excepted on- and off-campus PBDs without losing the ability to receive payment for hospital outpatient services paid under the OPPS rate.[9] This exception is an extension of the previously discussed extraordinary circumstances policy to combat the PHE ushered in by COVID-19. This expansion is particularly important because it allows on-campus PBDs to relocate, either on or after March 1, 2020, through the duration of the COVID-19 pandemic and seek an extraordinary circumstances exception. The exception will expire when the PHE declaration is lifted. Please note that the PBD relocation must be consistent with the state’s emergency preparedness and/or pandemic plan. Moreover, to improve access to care during the COVID-19 crisis, PBDs that relocate may bill and be paid for services furnished under the OPPS in the new location before submitting documentation to the CMS regional offices.

Post-COVID-19 relocation

Following the PHE, “hospitals may seek an extraordinary circumstances relocation exception for excepted off-campus” PBDs that relocated permanently; however, the hospital must “follow the standard extraordinary circumstances application process.”[10] Additionally, they must submit an updated CMS-855A enrollment form with the PBD’s new address. The PBD relocation request process will also resume, and CMS regional offices will retain discretion to approve or deny requests. PBDs that temporarily relocated off-campus to combat COVID-19 will be subject to the lower MPFS reimbursement rate if they do not return to their original PBD location after the PHE. PBDs that permanently relocate off-campus will be considered new off-campus PBDs and will be reimbursed the MPFS rate. Extraordinary circumstances exemptions will not be granted to on-campus PBDs that seek to permanently relocate after the PHE.

Operational considerations

Whether or not your organization used the 1135 waivers in relation to PBDs, it is prudent to have an accurate PBD inventory listing at all times. A cross-functional team can assess the status of each location and post-PHE strategy. The compliance team can act as a facilitator to bring together representatives from facilities, licensing, credentialing, finance, and reimbursement to ensure that different aspects of PBD compliance are covered, as these functional areas may not speak the same language or understand how all the pieces fit together to ensure overall PBD compliance.

A good way to start your inventory process is to have each area generate a listing from their records/understanding as to what constitutes your hospital’s PBDs. When you compare the listings, the responses may be surprising. Facilities may identify by floor plan, square footage, or suite number. Licensing might go by license number and address, credentialing by accreditation status, finance by a department name and number, reimbursement by cost report line, and revenue cycle by place of service and bill type. Some of the departments may not truly understand what it means to be a PBD. Working together as a team, the facility may recognize opportunities to fine-tune the change management processes around PBDs, as well as the need to formalize standard operating procedures.


  • The 1135 waivers temporarily waive certain Medicare provider-based department (PBD) requirements during the COVID-19 public health emergency.
  • Excepted on- and off-campus PBDs may relocate to combat COVID-19 and be reimbursed under the outpatient prospective payment system rate. Nonexcepted off-campus PBDs will retain their nonexcepted status even if they relocate during the COVID-19 pandemic and continue to be paid under the nonexcepted Medicare Physician Fee Schedule rate.
  • The temporary relocation exception policy will remain in effect until the COVID-19 public health emergency declaration is lifted.
  • To maintain the excepted off-campus PBD status once the temporary waiver expires, hospitals must follow the standard extraordinary circumstances application process.
  • A proactive assessment of all PBD locations, using a cross-functional team approach, will help identify opportunities for operational improvement.

[1] 42 C.F.R. § 413.65(e)(3)(ii).

[2] AJMC Staff, “A Timeline of COVID-19 Developments in 2020,” American Journal of Managed Care, January 1, 2021,

[3] Medicare and Medicaid Programs, Basic Health Program, and Exchanges; Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency and Delay of Certain Reporting Requirements for the Skilled Nursing Facility Quality Reporting Program, 85 Fed. Reg. 27,550 (August 5, 2020) .

[4] Centers for Medicare & Medicaid Services, “COVID-19 Emergency Declaration Blanket Waivers for Health Care Providers,” updated November 29, 2021,

[5] Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 603, 129 Stat. 597 (2015).

[6] Medicare and Medicaid Programs, Basic Health Program, and Exchanges; Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency and Delay of Certain Reporting Requirements for the Skilled Nursing Facility Quality Reporting Program, 85 Fed. Reg. 27,558 .

[7] Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-Campus Provider-Based Department of a Hospital; Hospital Value-Based Purchasing (VBP) Program; Establishment of Payment Rates Under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by an Off-Campus Provider-Based Department of a Hospital, 81 Fed. Reg. 79,562, 79,705 (November 14, 2016) .

[8] Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs, 81 Fed. Reg. 79,704–706 .

[9] Medicare and Medicaid Programs, Basic Health Program, and Exchanges, 85 Fed. Reg. 27,550 .

[10] Medicare and Medicaid Programs, Basic Health Program, and Exchanges, 85 Fed. Reg. 27,560

© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.


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