|Footnotes for this article are available at the end of this page.
On March 30, 2020, the Centers for Medicare & Medicaid Services (“CMS”) issued new rules and waivers targeted at ensuring hospitals and health systems have sufficient capacity to handle the potential surges of COVID-19 patients. One of the new policies is “CMS Hospitals Without Walls,” which (as the name implies) permits hospital services outside hospital walls1 and provides ambulatory surgery centers (“ASCs”) with new options and potential roles in the fight against COVID-19. These temporary rules allow hospital patients to be treated in facilities other than traditional hospital buildings – such as hotels, dormitories and ASCs. Importantly, “CMS Hospitals Without Walls” allows ASCs to:
- Contract with hospitals to allow the hospital to provide services from the ASC premises; or
- Directly enroll, bill, and provide services as hospitals during the COVID-19 emergency declaration.2
Under either option, CMS will make hospital payments for hospital services under Medicare. While “Hospitals Without Walls” is a new policy and many questions remain, CMS and other sources have helpfully provided guidance on the steps hospitals and ASCs should quickly take if interested in pursuing either of the above options.
Threshold Practical Issues for Consideration
In general, an ASC may elect to lease its facility to a hospital and allow the hospital to take over the enrollment process, management and operation of the location as a hospital facility, or an ASC might elect to enroll and bill as a hospital during the emergency declaration. Under either scenario, ASCs and hospitals need to evaluate about a number of considerations and potential issues before taking the initial steps toward contracting with one another for expanded hospital services. To help providers (and primarily ASCs) think through these issues, the Ambulatory Surgery Center Association (“ASCA”) has created a “COVID-19 Emergency Response Service Expansion Checklist.” The checklist includes:
- Is there a need in the community?
- What state rules/regulations that might affect the ASC’s ability to provide services under the blanket waivers?
- Are there any state emergency preparedness or pandemic rules that would prohibit the ASC from providing hospital services as a hospital provider under the federal regulatory changes?
- Do the ASC’s liability and malpractice insurance covers enhanced emergent services?
- Do the ASC’s bylaws allow for temporary/emergency privileges of additional providers in a short amount of time?
- Does the ASC have the supplies needed for the additional emergent procedures? If the hospital is going to lease the facility, who will be responsible for obtaining the necessary supplies?
- Will the ASC accept pediatric patients and, if so, what age range?
- Does the ASC have enough space for social distancing protocols?
- If an ASC plans to sublease its property to the hospital, does its lease allow subletting?
Hospitals Expanding Site/Services to Separately Owned ASCs
For a variety of practical reasons, an ASC may elect to lease its location to a hospital and allow the hospital to take over the enrollment process, management and operation of the location. Such an arrangement would provide the hospital with significant control over staffing, supplies, protocol and quality. In any scenario, the arrangement is highly likely to implicate the strict liability obligations of the Physician Self-Referral Law (Stark) and the separate obligations of the federal Antikickback Statute. In addition to the issues listed above, the parties should prepare to document the arrangement in writing – aware of the Stark and Antikickback guardrails that should be addressed. Applicable safe harbors and exceptions should be carefully examined and applied. Parties should be diligent when documenting these temporary arrangements and – if taking advantage of one of the Stark waivers issued on March 30 by HHS or the Policy Statement issued by the OIG on April 3, 2020 – be certain that the written agreement details the appropriate COVID-19 purpose and specifies the approved blanket waivers applied to the scenario.3
Beyond the regulatory analysis critical to the arrangement, the parties will also need to properly allocate risk and obtain any necessary third party consents. Given the need to quickly and decisively close the transaction, it would make sense for the parties to clearly allocate risk on a “my watch / your watch” basis such that the temporary tenant (the hospital) takes possession of the premises, staff, equipment and supplies with limited representations and warranties – and look to its own insurer to cover risks that might have come to light in a standard diligence process. Issues such as maintenance and access might best be shifted to the hospital during the term of the arrangement, with an obligation to maintain a standard of maintenance consistent with the hospital’s general standards, while also at least equal to that presented by the ASC in it historical operations. The landlord in this instance – the ASC – would want to consider what it can/should do with any assets that are to be carved out of the arrangement, such as private office space, medical records or IT systems and workstations, or lab space that are not to be used or accessed by the hospital. Noting that such an arrangement would largely be a real estate transaction, the parties should immediately seek any third party (e.g., master landlord) consents necessary to consummate the transaction. So that the ASC can quickly re-engage as an independent ambulatory surgery center following the end of the public health emergency, the arrangement should also address the timing of any termination and the return of the property, staff and equipment.
Once an agreement has been finalized, the hospital does not need to provide any notice or filing to CMS. In the COVID-19 Interim Final Rule FAQs, CMS stated that hospitals do not need to report to CMS or the MAC that hospital services are being provided at an off-site location. Instead:
Hospitals may begin billing for care in their surge locations or expansion site for inpatient or outpatient services under their existing CMS Certification Number (CCN) for care furnished during the [public health emergency]. CMS will also be exercising our enforcement discretion and will not be conducting the onsite survey for hospital surge locations during the [public health emergency].
On a March 31, 2020, stakeholder call, CMS Administrator Seema Verma provided additional detail on CMS’ vision for the Hospitals Without Walls policy. The agency believes likely results of the policy are hospitals “function[ing] as a kind of collaborative headquarters coordinating a variety of settings of care.” Ms. Verma envisioned ASCs acting as “hospital-like care centers,” such as “cancer treatment or essential surgeries” so that hospitals can focus on COVID-19 patients, implying that patients who were scheduled for essential surgeries will be moved from the hospital setting to an ASC.
Hospitals Expanding Site/Services to Hospital Owned ASCs
Health systems already owning and operating an ASC should find the process outlined above much more streamlined. Instead of focusing on negotiations with a third party ASC, the hospital can concentrate on ensuring the appropriate personnel and equipment are at the hospital-owned ASC. As stated above, hospitals do not need to report to CMS or the MAC that hospital services are provided at an off-site location.
Medicare-Enrolled ASCs Temporarily Enrolling as Hospitals
Whether a facility is to be leased by an ASC to a hospital or a hospital is going to enroll its own ASC, CMS has provided specifics on the steps currently enrolled ASCs need to take in order to temporarily enroll as hospitals. While temporarily enrolled as a hospital, the ASC will receive the benefit of a higher hospital rate; however, ASCs should also consider potential issues related to temporary hospital enrollment (in addition to those issues raised at Section I, above). For example, can the ASC facility meet the hospital Medicare Conditions of Participation, to the extent not waived? Could there be delays in payment because of the temporary switch in enrollment? How long after the public health emergency will it take for CMS to return ASC status (because the provider cannot be certified/enrolled both as an ASC and hospital at the same time)? Could there be delays in resuming ASC payments after the end of the public health emergency?
Enrollment of a location as a hospital site is typically no small matter (i.e., time consuming.) In order to address the necessary sense of urgency, in part, CMS issued a memorandum on April 3, 2020 to State Survey Agency Directors titled “Guidance for Processing Attestation Statements from Ambulatory Surgical Centers (ASCs) Temporarily Enrolling as Hospitals during the COVID-19 Public Health Emergency.” The memorandum outlines the following steps for state surveyors to take when an ASC wishes to temporarily enroll as a hospital:
- Unlike hospitals providing services at off-site locations (see Section II above), notice is required where an ASC desires to temporarily enroll as a hospital. The Medicare-certified ASC should notify the Medicare Administrative Contractor (“MAC”) that serves their jurisdiction by calling the MAC’s provider enrollment hotline. In COVID-19 Interim Final Rule FAQs, CMS also recommends deemed ASCs notify their applicable accrediting organizations at this time. CMS also notes, however, that during the public health emergency, the newly enrolled hospitals will fall under the jurisdiction of the applicable state survey agency and not the accrediting organization.
- The MAC will ask the ASC to submit a signed attestation statement to the MAC.
- The MAC will review and forward the signed attestation statement to the CMS Regional Office (“RO”) mailbox.
- Within two (2) business days, the RO will review all survey activity of the facility from the previous three (3) years to determine if Immediate Jeopardy (“IJ”)-level tags were cited.
- Note: for deemed status ASCs, CMS Central Office will provide a list to the CMS Survey Operations Group of those ASCs with IJ-level deficiencies cited within the previous three years.
- If no IJ-level deficiencies were found in the previous three years, or if IJ-level deficiencies were found by subsequently removed through the normal survey process, the RO will:
- Review and approve the attestation statement.
- Create a new facility profile and certification kit in the Automated Survey Process Environment and assign a hospital CMS Certification Number (CCN)
- Send a tie-in notice as a hospital to the MAC. The effective date of enrollment is the date when the attestation was accepted by the MAC.
- If IJ-level deficiencies are found within the last year and enforcement activities are currently ongoing, then the RO will not accept the attestation and notify the MAC of denial of temporary hospital enrollment.
- Note that an onsite survey is not required for approval.
- Once the Secretary of the Department of Health and Human Services determines there is no longer a public health emergency due to COVID-19, the RO will terminate the hospital CCN and send a tie-out notice to the applicable MAC.
- The MAC will deactivate the hospital billing privileges and reinstate the ASC billing privileges effective on the date the ASC terminates its hospital status.
- If the ASC wishes to participate as a hospital after the public health emergency has ended, it must submit form Medicare Part A enrollment application to begin the process of enrollment and initial certification as a hospital under the regular processes.
As a part of the attestation submission process (see #2 directly above), the ASC will attest to compliance with certain Conditions of Participation, to the extent not waived. The listing on the attestation includes affirmation of compliance with:
- Nursing service requirements (e.g., providing 24 hour nursing services furnished or supervised by a registered nurse).
- Pharmaceutical service requirements (e.g., provide a full-time, part-time or consultant pharmacist who is responsible for all activities of the pharmacy services).
- Infection control requirements (e.g., employ methods for preventing and controlling the transmission within the hospital and between other providers).
- Respiratory service requirements (e.g., ensure an adequate number of qualified respiratory therapists and technicians).
The Hospitals without walls policy does not operate within a vacuum – state laws apply to both the ASCs and to hospitals – including the enrollment of an ASC as a hospital.
State Emergency Response/Pandemic Plan
CMS has taken care to note in multiple documents related to Hospitals Without Walls that the enrollment flexibility is available to ASCs “as long as [it is] not inconsistent with their State’s Emergency Preparedness or Pandemic Plan.” In order to ensure compliance with this requirement, ASCs should identify the appropriate state emergency preparedness or pandemic plan and contact applicable state agencies to confirm it is the correct source. If possible, the ASC should seek written confirmation that temporary enrollment as a hospital is not inconsistent with the plan. As with much of the legislative and agency action related to the pandemic, due to the volume of federal actions and uncertainty inherent to the management of the pandemic, state action may be lagging or lack the specificity desired by the parties.4
The parties also need to be mindful of state licensure considerations. For example, how does the temporary provision of hospital services affect the provider’s ASC license (if the state requires ASC licensure)? Are there hospital licensure requirements? While many states may not have addressed these issues directly, it is important for ASCs to communicate with applicable state agencies to ensure they are meeting state requirements. For example, Georgia’s governor signed Executive Order 03.20.20.02 on March 20, 2020. It orders:
That the Department of Community Health [(“DCH”)] is authorized and directed to implement the suspension of Code Section 31-2-7 where such suspension would reduce the administrative burden on healthcare facilities and the State in responding to the Public Health Emergency presented by COVID-19.”
Code Section 31-2-7 addresses DCH’s ability to promulgate and waive regulations, which includes licensure of health facilities.
In a letter dated April 1, 2020, DCH confirmed that any action taken by a provider pursuant to a waiver issued by CMS does not require additional approval by the Healthcare Facility Regulation Division (HFRD).5 DCH also stated that any activity that may violate state licensing rules and does not fall under a CMS waiver requires approval by the HFRD. Because CMS has implemented the Hospitals Without Walls policy, it appears no separate approval would be required from HFRD.
Certificate of Need
ASCs and hospitals in states with certificate of need (“CON”) programs also need to review the Hospitals Without Walls policy in light of state restrictions on services and facilities covered by CON. CON programs are typically tasked with ensuring the restriction on health facility sprawl, a goal that is in conflict with the healthcare needs presented by the COVID-19 public health emergency. In response, many states have issued CON waivers that should alleviate concerns that temporary hospital expansion or enrollment violate CON requirements. For example, Georgia’s Executive Order 03.20.20.02 authorizes the Department of Community Health (DCH) to suspend Code Section 31-6-40 “where such suspension would permit capable facilities to expand capacity, offer services, or make expenditures necessary to assist with the needs of this Public Health State of Emergency.” Code Section 31-6-40 relates to Georgia’s CON program. In order to request a waiver of Georgia’s CON law, DCH requires providers to complete the COVID-19 Code Section 31-6-40 Suspension Request Form, which requests provider information and specificity as to the waiver requested.
Acute care providers are the front line in the fight against COVID-19. Federal and state authorities have developed flexibilities, such as the Hospitals Without Walls policy, to help these providers quickly expand their capacity and capability to fight through relatively quick and easy enrollment requirements and incentives. For any hospital considering expanding the locations in which it provides services or ASC considering leasing its space to a hospital or enrolling as a hospital itself, the key is understanding the steps (many of which are outlined above), working through them quickly, and continuing to stay abreast of rapid federal and state regulatory changes. Given the speed with which COVID-19 spreads, hospitals would be well served to act now prepare for service expansion in advance of the actual need.
For more information or assistance with applying the Hospitals Without Walls policy, please contact R. Michael Barry or Alexander B. Foster.
 Under federal requirements, hospitals must provide services within their own buildings.
 Both options are subject to certain requirements and restrictions.
 Blanket Waivers of Section 1877(g) of the Social Security Act Due to Declaration of COVID-19 Outbreak in the United States as a National Emergency, issued March 30, 2020.
 For example, in Georgia the appropriate plan appears to be the Emergency Operations Plan (EOP). The EOP specifically identifies infectious diseases as a natural hazard to the citizens of Georgia. In the EOP’s “Assignment of Responsibilities,” the Georgia Department of Public Health is assigned the role of Public Health and Medical Services Coordinator, which includes responsibility for public health, coordination of private and non-profit health systems in disasters, coordination of mass fatality management, and infectious disease surveillance and response coordination. In the Public Health Annex to the EOP, additional information, such as the direction, control, and coordination of the public health response and agencies and associations involved in the response, is outlined. The EOP and Public Health Annex do not directly address health facilities’ response to a public health emergency, and there does not appear to be any inconsistency between the EOP and CMS’ Hospitals Without Walls policy, though we would recommend written confirmation from the applicable agency(ies), where possible..
 Note that the April 1 letter was addressed to the Georgia Health Care Association in response to a request related to nursing homes. However, the response from DCH appears to have broader applicability to other healthcare providers as well.