CMS Issues Guidance on When a Hospital is a Hospital

CMS Issues Guidance on When a Hospital is a Hospital

By Christopher Parrella J.D.

Is your hospital really a hospital? Well, that depends on whether Medicare deems it so.

Earlier this month, the Centers for Medicare & Medicaid Services issued clarifying guidance on what constitutes a hospital. Under these new guidelines, holding a state hospital license isn’t necessarily the end all for receiving Medicare reimbursement.

CMS says it will now consider multiple factors and “make a final determination based on an evaluation of the facility in totality.” Those factors will include, but are not limited to: average length of stay (ALOS), average daily census (ADC), the number of off-campus outpatient locations, the number of provider-based emergency departments, the number of inpatient beds related to the size of the facility and scope of services offered, volume of outpatient surgical procedures compared to inpatient surgical procedures, staffing patterns, patterns of ADC by day of the week, among others.

This is particularly challenging for smaller so-called hospitals that operate more like outpatient clinics.

To be considered primarily engaged in providing inpatient services, prospective hospital providers and currently participating hospitals should also be able to maintain an ALOS of two midnights or greater. For surveyors to determine whether a hospital is in compliance with the statutory and regulatory requirements of Medicare participation, including the definition of a hospital, they must observe the provision of care.

CMS noted that a hospital must have two inpatients at the time of survey for surveyors to directly observe the actual provision of care to inpatients. If a hospital does not have at least two inpatients at the time of a survey, a survey will not be conducted at that time, and an initial review of the facility’s admission data will be performed by surveyors while onsite to determine if the hospital has had an ADC of at least two and an ALOS of at least two midnights over the last 12 months.

Critical Access Hospitals and Psychiatric Hospitals are not included in this guidance.

Although CMS maintains that hospitals are not required to have a specific inpatient to outpatient ratio to meet the definition of primarily engaged, it goes on to state that “having the capacity or potential capacity to provide inpatient care is not the equivalent of actually providing inpatient care.”

Other factors that the CMS Regional Office should consider in determining whether to

conduct a second survey or recommend denial of an initial applicant or termination of a

current provider agreement, include but are not limited to:

  • The number of provider-based off-campus emergency departments (EDs). An unusually

large number of off-campus EDs may suggest that a facility is not primarily engaged in inpatient care.

  • The number of inpatient beds in relation to the size of the facility and services offered.
  • The volume of outpatient surgical procedures compared to inpatient surgical procedures.
  • If the facility considers itself to be a “surgical” hospital, are procedures mostly outpatient?
  • Patterns and trends in the ADC by the day of the week. For example, does the ADC consistently drop to zero on the weekend?
  • Staffing patterns. A review of staffing schedules should demonstrate that nurses, pharmacists, physicians, etc. are scheduled to work to support 24/7 inpatient care versus staffing patterns for the support of outpatient operations.
  • How does the facility advertise itself to the community?  Is it advertised as a “specialty” hospital or “emergency” hospital?  Does the name of the facility include terms like “clinic” or “center” as opposed to “hospital”?

CMS has the final authority to make the determination whether a facility has met the statutory definition of a hospital. State license approval and Medicare contractor approval of an enrollment application do not mean that CMS will automatically consider the facility to be a “hospital” for federal survey and certification purposes.

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