Five Points ASCs Should Consider Before Enrolling as a “Hospital” During the COVID-19 Crisis

April 6, 2020

On March 31, 2020, the Centers for Medicare & Medicaid Services announced temporary measures that will allow ambulatory surgery centers (ASCs) no longer doing elective and non-essential procedures during the COVID-19 outbreak to help alleviate hospitals’ current capacity and resource strains. CMS will temporarily permit an ASC to contract with a local healthcare system to provide hospital services, or enroll and bill as a hospital during the federal government’s emergency declaration. The following summary outlines CMS’ guidelines and other considerations regarding this action.

  1. Hospitals Without Walls – CMS is waiving certain requirements under the Medicare conditions of participation to address the urgent need for additional hospital bed capacity. Pursuant to these waivers, an ASC may contract with a hospital to allow the hospital to use its space as part of the hospital. Alternatively, a Medicare-enrolled ASC may expand its services to include hospital services and temporarily enroll and bill under Medicare as a hospital during the pandemic. Each location operated by the hospital and ASCs opting to enroll and bill as a hospital must meet the conditions of participation and other requirements not waived by CMS, and comply with their states’ emergency preparedness or pandemic plans and be approved by state regulators. CMS’ announcement will permit ASCs to be used for patient care and quarantine sites during the COVID-19 outbreak.
  1. ASC Enrollment as a Hospital – CMS issued guidance for an ASC choosing to enroll as a hospital during the COVID-19 pandemic. To enroll as a hospital, an ASC should contact the COVID-19 Provider Enrollment Hotline for the Medicare Administrative Contractor (MAC) that serves its jurisdiction to complete and sign an attestation form. Once CMS receives the attestation form, it will review all of the ASC’s survey activity from the previous three years to determine whether the facility received any Immediate Jeopardy-level deficiency citations. An on-site survey is not required prior to approval; however, CMS may authorize a survey at a later date to ensure quality and safety, including infection control and appropriate personal protective equipment. If the ASC has not been cited for Immediate Jeopardy-level deficiencies, or if any Immediate Jeopardy-level deficiencies were removed through normal survey processes, then CMS will review and approve the attestation form and assign a hospital CMS Certification Number (CCN). An ASC may not enroll as a hospital if the ASC received an Immediate Jeopardy-level deficiency citation within the last year and enforcement activities are ongoing. Please note that a provider cannot be enrolled as an ASC and a hospital at the same time. If an ASC enrolls as a hospital during the pandemic, CMS will temporarily deactivate the ASC’s billing privileges. CMS will terminate the provider’s hospital CCN and reinstate its ASC billing privileges when the Secretary determines the public health emergency due to COVID-19 has ended, or the facility provides written notice to its MAC requesting that its ASC billing privileges be reinstated, whichever is sooner. CMS advises that an ASC should comply with all ASC conditions for coverage if there is not a present need for the ASC to be a hospital under its state’s emergency preparedness or pandemic plan.
  1. The Stark Law Implications – As a general rule, the Stark Law does not apply to ASC services, and most ASCs are not required to adhere to the Stark Law in the same way hospitals must. ASCs that intend to convert under the new waivers will now be required to abide by the Stark Law (in addition to the federal Anti-Kickback Statute that always applied to ASCs). One especially important component of the Stark Law for ASC owners to understand is that it does not permit physicians to own hospitals except in limited situations (most notably hospitals that were grandfathered with physician ownership prior to passage of the Affordable Care Act in 2010). Most ASCs are owned by physicians. So an ASC’s conversion to a hospital would ordinarily not be permitted under the Stark Law. To give providers greater flexibility, CMS announced that it is waiving sanctions for certain referrals and claims that would otherwise violate the Stark Law during this public health emergency. The blanket waivers issued by CMS only apply if they are one of 18 enumerated relationships, the provider acts in good faith but cannot meet the Stark Law as a result of the consequences of the COVID-19 pandemic, and the government does not determine the relationship creates fraud or abuse concerns (instead of the Stark Law’s typical strict liability applicability). One of the enumerated relationships is a physician-owned ASC enrolling as a Medicare-participating hospital during the period of the public health emergency, even if it is unable to satisfy certain hospital ownership and investment restrictions (42 U.S.C. 1395nn(i)(1)). The financial relationships and referrals also need to relate to the COVID-19 outbreak, which ultimately is likely to apply in the case of an ASC conversion, either because such converted facility will diagnose or treat individuals with COVID-19 or expand capacity needed to address patient and community needs. Although the waivers do not require notice or pre-approval from CMS, a provider utilizing the waivers should document its reliance on the waiver and make such documents available to the Secretary of the Department of Health and Human Services (Secretary) upon request. Contact one of the authors of this alert for questions regarding whether a specific remuneration or referral arrangement would be subject to CMS’ blanket waiver.
  1. The Anti-Kickback Statute and ASC Safe Harbor Implications – Most ASCs seek to structure their ownership to be as strictly compliant as possible with the ASC Safe Harbor to the federal Anti-Kickback Statute. That ASC Safe Harbor contains a number of provisions, such as the so-called one-third tests, which may not be appropriate for a hospital to enforce due to regulatory concerns, most notably the Stark Law. ASCs seeking to convert to a hospital should exercise caution regarding ASC Safe Harbor enforcement throughout the emergency and for a reasonable period thereafter, and should consult legal counsel on how to balance the myriad of concerns regarding the interplay between the Stark Law and the ASC Safe Harbor.
  1. Practical Considerations – While these efforts may help address the current COVID-19 public health emergency, there are several practical and logistical concerns to consider before contracting with a local hospital or enrolling in Medicare to bill as a hospital.
    • State Laws, Regulations and Executive Orders – Although CMS has waived certain provisions that would allow a hospital to use ASC space or would allow an ASC to enroll and bill under Medicare as a hospital, each facility must still comply with its state’s emergency plans and licensure requirements. Before contracting with a hospital or enrolling with CMS as a hospital, each ASC should confirm that its intended course of action complies with its state’s emergency plan and regulations as well as any additional state licensing, certificate of need or other requirements.
    • Restrictions on Subleasing – Many lease agreements have restrictions on subleasing and the type of business that may be operated out of the space. Before allowing a hospital to use its space or converting its operations from an ASC to a hospital, an ASC should review its lease agreement and determine whether the landlord’s consent is required. If it is going to permit a hospital to use its space, it should consider entering into a short agreement with the hospital that describes the terms of the hospital’s use of the space, including when the hospital must vacate the space and how any potential liability at the facility will be allocated.
    • Insurance Coverage – Allowing a hospital to operate out of its space or expanding the services provided by the ASC may impact the ASC’s malpractice coverage. It is recommended that an ASC contact its insurance provider to determine whether any modifications need to be made to its current policies to accommodate the hospital’s use of the space or the expansion of services offered at the facility.
    • Timing – CMS’ waivers only apply for as long as this public health emergency continues. While allowing a hospital to use its space during this time will likely involve minimal effort and expense for the ASC, temporarily enrolling in Medicare may be a more substantial endeavor. An ASC should consider the work and expense required to operate as a hospital, especially in light of any state-specific requirements, and balance those considerations against the benefits to the ASC, its staff, patients and community.
    • Interplay Between Hospital and CMS Conditions – There are a handful of additional nuances in the interplay between the ASC Conditions for Coverage and Hospital Conditions of Participation. It will be important for ASCs that intend to return to routine operations post-emergency, and thus desire to maintain their good standing with Medicare, to discuss this interplay with legal counsel.