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Health care and the law: winds of change buffet community oncology

September 14, 2016
From the September 2016 issue of HealthCare Business News magazine

In addition, if the hospital qualified to participate in the 340B program, and if the off-campus infusion facility was located within 35 miles of the hospital, the off-campus facility would have qualified for 340B drug discounts. This meant that the hospital could acquire infusion and supportive drugs for such an off-campus infusion center at a 22 to 34 percent discount — which translated directly into substantial additional contribution margin for the hospital.

It was also a “win” for participating oncology groups, since the groups could remain independent, and enter into a relatively lucrative Professional Services Agreement (PSA) with the hospital to staff and help manage the off-campus site. Aggregate payments to the oncology group under these PSA arrangements typically exceeded what the oncology group could earn from physician office rate reimbursement for providing such services on its own.

So what has changed? For one thing, the site-neutrality provision of BBA eliminates Medicare hospital outpatient payment rates for new off-campus, provider-based sites, beginning Dec. 31, 2017, with limited exceptions. On and after Jan. 1, 2017, new off-campus, provider-based sites that do not meet an exception will be paid by Medicare at physician office or ambulatory surgery center rates. This is intended to level the Medicare playing field between hospitals and medical groups when it comes to Medicare payment for “freestanding” (off-campus) ambulatory care or surgical services. The two most pertinent exceptions to this new site neutrality payment rule are for: “grandfathered” off-campus, provider-based facilities that were established as provider-based sites by hospitals on or before Nov. 2, 2015; and on-campus facilities — that is, facilities that are part of the main hospital building or that are located within 250 yards of the main hospital building. These facilities will continue to qualify to be paid by Medicare at hospital outpatient payment rates even after Jan. 1, 2017. As a result, a non-level Medicare playing field will persist for hospitals that converted physician practices to provider-based sites before Nov. 2, 2015, or that operate on-campus cancer centers. Oncologist owned cancer centers will remain at an economic or competitive disadvantage in these situations.

HRSA’s Omnibus Guidance, if enacted as proposed, would significantly impact the availability of 340B drug discounts for eligible hospitals. One of the key changes proposed is to the definition of “patient” for the purpose of determining whose prescriptions are eligible for the 340B discount. The most controversial aspect is the proposal to require the eligible hospital to bill for the oncology services “on behalf of” the employed or contracted provider who renders the services to an eligible patient. This would deny 340B program eligibility to any hospital that contracts with an oncology group for professional services and permits the group to bill separately for those professional component services — which is a relatively common and historically permitted arrangement for 340B program purposes.

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