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The Centers for Medicare and Medicaid Services (CMS) recently issued guidance implementing the "Hospitals Without Walls" initiative to address the urgent need to expand care capacity and to develop physical sites dedicated to COVID-19 treatment. As part of Hospitals Without Walls, hospitals can provide hospital services in other healthcare facilities and sites, such as ambulatory surgery centers (ASCs), inpatient rehabilitation hospitals, hotels, and dormitories, while still receiving hospital payments under Medicare.

CMS implemented Hospitals Without Walls in response to hospitals’ shared concerns about capacity for treating patients during the COVID-19 public health emergency, especially those requiring ventilator and intensive care services. While federal requirements previously required hospitals to provide services to patients within their hospital departments, these new CMS guidelines aim to remove these obstacles and allow hospitals to create surge capacity. The guidelines will allow hospitals to provide hospital services at remote locations or sites not considered part of a healthcare facility, provided that (i) the hospital maintains control and oversees the services provided at the alternative location, (ii) the location generally meets the relevant hospital conditions of Medicare participation, which CMS is also temporarily relaxing for these sites, and (iii) is approved by the State.

These temporary changes will remain in effect for the duration of the COVID-19 public health emergency and is the latest in a series of federal actions intended to alleviate any unnecessary regulatory burden on hospitals and health systems as they continue to focus on the increasing number of COVID-19 patients.

The Initiative

Under Hospitals Without Walls, hospitals and health systems will be permitted to greatly expand temporary care sites, including:

Providing Inpatient Care in Temporary Expansion Sites

Under these temporary initiatives, hospitals will be permitted to provide hospital services in other healthcare facilities and sites not currently considered to be part of a healthcare facility by establishing temporary expansion sites to help address the urgent need to increase capacity to care for patients. CMS has established a dedicated enrollment process for hospitals seeking to quickly enroll new COVID-19 sites using the COVID-19 Provider Enrollment Hotline, indicating that most new sites meeting the relevant requirements will receive temporary billing privileges within 48 hours. 

Contracting with Ambulatory Surgery Centers (ASCs) to Provide Hospital Services

ASCs will be permitted to contract with healthcare systems to provide hospital services or temporarily enroll and bill as hospitals themselves during the emergency declaration, provided that doing so is consistent with the relevant state’s Emergency Preparedness or Pandemic Plan. ASCs that wish to enroll to receive temporary billing privileges as a hospital can do so through the COVID-19 Provider Enrollment Hotline.

By expanding treatment capabilities to off-site locations such as ASCs, the initiative should better enable hospitals to respond to patient surges, allowing hospitals to focus on the most critical and medically complex COVID-19 patients, to maintain infection control protocols, and to conserve personal protective equipment.

Relaxing Restrictions on Payment for Hospital Services Provided "Under Arrangements"

Longstanding CMS policy has historically prohibited hospital inpatient services from being reimbursed when they are provided by a separate, third-party entity outside the hospital, even where the third-party entity is itself a hospital. Recognizing that this prohibition could affect hospital flexibility in providing COVID-19 care in separate isolation sites, CMS issued guidance in an interim final rule relaxing the prohibition on Medicare payment for the full range of inpatient services when performed "under arrangement" "outside the hospital." CMS cautioned, however, that "[h]ospitals need to continue to exercise sufficient control and responsibility over the use of hospital resources in treating patients regardless of whether that treatment occurs in the hospital or outside the hospital under arrangements. If a hospital cannot exercise sufficient control and responsibility over the use of hospital resources in treating patients outside the hospital under arrangements, the hospital should not provide those services outside the hospital under arrangements."

Increasing Off Site Patient Screening

Under the CMS waiver, CMS will permit non-hospital buildings to be used for patient care and quarantine sites, provided that those buildings meet state rules regarding safety and comfort for patients and staff. Accordingly, hospitals will have increased flexibilities to screen patients at locations offsite from the hospital’s campus to prevent the spread of COVID-19, as long as it is not inconsistent with their State’s Emergency Preparedness or Pandemic Plan.

Practical Takeaways

The Hospitals Without Walls initiative, and relaxing of the rules governing payment for services provided by hospitals "under arrangement" with another entity, should provide welcome flexibility to hospitals. It also provides unique opportunities for other healthcare providers, such as ASCs, with underutilized space to assist with combatting the pandemic; while also opening up a stream of income to what have been mostly shuttered facilities and furloughed workforce. The guidance, however, should not be evaluated as a "green light" to immediately initiate such a program and providers should take care to make sure that any affiliation between healthcare providers is properly vetted by counsel.

For example, Hospitals Without Walls applies only to Medicare and Medicaid coverage and payment policies and does not directly affect state requirements for facility licensure or medical professional licensure. Entities pursuing the options provided by Hospitals Without Walls should confirm with their respective states to identify what actions may need to be taken under state laws and regulations to take advantage of the initiative. Additionally, providers should be mindful of the federal and state fraud and abuse laws that may govern their arrangements. Ensuring that any arrangements are structured to satisfy a Stark exception or kickback "safe harbor" will help ensure that the arrangements do not result in liability under such laws. 

Finally, providers should be careful to ensure that private payors will also pay for care provided in any alternative arrangements and that they are meeting any relevant administrative requirements for complete and timely payment from such payors. Taking such actions will help to ensure that the providers’ good deeds do indeed go unpunished. 

For more cutting-edge perspectives on the legal and business implications of COVID-19, visit our COVID-19 resource center.