[Federal Register Volume 84, Number 225 (Thursday, November 21, 2019)]
[Proposed Rules]
[Pages 64235-64243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24880]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AQ68


Provider-Based Requirements

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
regulations concerning collection and recovery by VA for medical care 
and services provided to an individual at a VA medical facility for 
treatment of a nonservice-connected condition. Specifically, this 
rulemaking would add a regulation that establishes the requirements VA 
will use to determine whether a VA medical facility has provider-based 
status. Such determination affects the amount VA can recover from a 
third party for the cost of the nonservice-connected care. Currently, 
VA uses the requirements established by the Centers for Medicare and 
Medicaid Services to determine whether the facility has provider-based 
status; however, it is necessary for VA to establish its own 
requirements that are tailored to VA's unique operation and structure.

DATES: Comments must be received by VA on or before January 21, 2020.

ADDRESSES: Written comments may be submitted through http://www.Regulations.gov, by mail or hand-delivery to Director, Office of 
Regulation Policy and Management (00REG), Department of Veterans 
Affairs, 810 Vermont Avenue NW, Room 1064, Washington, DC 20420; or by 
fax to (202) 273-9026. (This is not a toll-free number.) Comments 
should indicate that they are submitted in response to RIN 2900-AQ68, 
Provider-Based Requirements. Copies of comments received will be 
available for public inspection in the Office of Regulation Policy and 
Management, Room 1064, between the hours of 8:00 a.m. and 4:30 p.m. 
Monday through Friday (except holidays). Please call (202) 461-4902 for 
an appointment. (This is not a toll-free number.) In addition, during 
the comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at http://www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Joseph Duran, Director of Policy and 
Planning, Office of Community Care (10D), Ptarmigan at Cherry Creek 
Denver, CO, 80209, [email protected] or (303) 372-4629. (This is not 
a toll-free number.)

SUPPLEMENTARY INFORMATION: VA is authorized under 38 U.S.C. 1729 to 
recover or collect from a third party the reasonable charges for 
medical care or services VA furnishes to an individual for a non-
service connected disability, to the extent that the individual, or the 
provider of care or services, would be eligible to receive payment from 
the third party if the care or services had not been furnished by VA. 
VA's collection or recovery under section 1729 is limited to care or 
services furnished by VA for a nonservice-connected disability: 
Incurred incident to the individual's employment and covered under a 
worker's compensation law or plan that provides reimbursement or 
indemnification for such care and services; incurred as the result of a 
crime of personal violence that occurred in a State, or a political 
subdivision of a State, in which a person injured as the result of such 
a crime is entitled to receive health care and services at such State's 
or subdivision's expense for personal injuries suffered as the result 
of such crime; incurred as a result of a motor vehicle accident in a 
State that requires automobile accident reparations (no-fault) 
insurance; or for which the individual is entitled to care (or the 
payment of expenses of care) under a health plan contract.
    VA implements its authority under section 1729 through regulations 
at title 38 Code of Federal Regulations (CFR) 17.101 through 17.106. 
More specifically, the methodology that VA uses to determine the amount 
of its collection or recovery for is established in 38 CFR 17.101. This 
rulemaking would primarily seek to revise this methodology with regards 
to calculating the reasonable charges for care and services VA provides 
on an outpatient basis. Prior to explaining the proposed regulatory 
changes for Sec.  17.101, we provide the following background on how VA 
developed its current methodology for charges for outpatient

[[Page 64236]]

services. Historically, if VA had a specific item of medical care or 
service provided on an outpatient basis, VA could charge a professional 
charge, an outpatient facility charge, or both. These charges were 
developed so as to be mutually exclusive, with the expectation that 
both charges could be billed for the same occasion of service.
    In April 2000, the Centers for Medicare and Medicaid Services (CMS) 
published a final rule with comment period that, in pertinent part, 
codified its long-standing use of provider-based status in regulation 
at 42 CFR 413.65. 65 FR 18434 (April 7, 2000). In this final rule, CMS 
explained that, since the Medicare program started, some providers, 
referred to as main providers, had functioned as a single entity while 
owning and operating additional departments, locations, and facilities. 
These departments, locations, and facilities were referred to as 
provider-based and were treated as part of the main provider for 
Medicare purposes. In this regard, to the extent that overhead costs of 
the main provider, such as administrative and general costs, were 
shared by the provider-based facility, these costs were allowed to flow 
to the provider-based facility through the cost allocation process in 
the cost report. This was considered appropriate because these 
facilities were also operationally integrated, and the provider-based 
facility was sharing the overhead costs and revenue producing services 
controlled by the main provider. In the April 2000 final rulemaking, 
CMS defined the term provider-based status as the relationship between 
a main provider and a provider-based entity or a department of a 
provider, remote location of a hospital, or satellite facility, that 
complies with the provisions of this section. 42 CFR 413.65(a)(2). It 
also established specific requirements that must be met in order for 
CMS to recognize a facility as having provider-based status. CMS 
explained that specific criteria were necessary because the designation 
of provider-based status could result in additional Medicare payments 
for services furnished at the provider-based facility (outpatient 
facility charges), and could also increase the coinsurance liability of 
Medicare beneficiaries for those services. The final rule clarified 
that 42 CFR 413.65 applied to providers and facilities seeking Medicare 
payment. As VA does not seek Medicare payment, the requirements and 
criteria established in 42 CFR 413.65 applies to VA only if VA so 
establishes through its own regulations.
    In December 2003, VA amended 38 CFR 17.101 to establish that VA 
would use the CMS provider-based criteria in 42 CFR 413.65 to more 
closely approximate industry standard charge structures and billing 
practices. 68 FR 70714 (December 19, 2003). That VA rulemaking further 
established two sets of charges for outpatient care consistent with 
Medicare: One for use by facilities that had provider-based status and 
one for facilities that did not have provider-based status. The 
facilities that had provider-based status could bill both an outpatient 
professional and facility charge. The facilities that did not have 
provider-based status could only bill a professional charge. In 
consideration of the fact that facilities that did not have provider-
based status could only bill a professional charge, the professional 
charge for those facilities would be higher than the professional 
charge for facilities that had provider-based status, based on 
Medicare's higher non-facility practice expense relative value units 
(RVUs).
    Currently, VA defines the terms provider-based and non-provider-
based in 38 CFR 17.101(a)(5). Section 17.101(a)(5) defines provider-
based as the outpatient department of a VA hospital or any other VA 
health care entity that meets CMS provider-based criteria. Provider-
based entities are entitled to bill outpatient facility charges. Under 
Sec.  17.101(a)(5), non-provider-based is defined as a VA health care 
entity (such as a small VA community-based outpatient clinic) that 
functions as the equivalent of a doctor's office or for other reasons 
does not meet CMS provider-based criteria, and, therefore, is not 
entitled to bill outpatient facility charges. VA establishes the use of 
the CMS provider-based criteria in its third-party billing through 
Sec.  17.101(a)(6), which states in pertinent part that each VA health 
care entity are designated as either provider-based or non-provider 
based provider-based entities are entitled to bill outpatient facility 
charges; non-provider-based entities are not.
    For the reasons below, VA proposes to revise 38 CFR 17.101 to 
remove the current regulatory requirement that VA use the CMS provider-
based criteria with regards to VA billing of third parties, and 
proposes to add a new regulation at 38 CFR 17.100 that would establish 
the criteria that VA would use instead to determine whether a VA 
facility has provider-based status. In so doing, VA would model new 
proposed 38 CFR 17.100 on a majority of the current CMS provider-based 
criteria in 42 CFR 413.65, but VA's revisions would address the unique 
structure of VA's health care system, versus the CMS requirements that 
are more generally applicable to private health care systems. 
Significantly, VA is an integrated, national health care system and, 
therefore, some of the CMS requirements in 42 CFR 413.65, especially as 
they pertain to proximity limitations and licensure, are not 
appropriate to use for VA facilities. Those CMS requirements that are 
not appropriate to use for VA facilities are further identified and 
explained in more detail in the discussions below.
    Additionally, to provide a scope for the proposed changes further 
explained below, we note that as of June 2018, 93 percent out of the 
total number of VA's facilities from which recoverable costs for care 
or services are provided (VA's billable facilities) already meet the 
current CMS provider-based criteria under 42 CFR 413.65(d) and (e) to 
permit VA to bill both an outpatient professional charge and an 
outpatient facility charge. Therefore, the proposed changes explained 
below would only have a potential effect in practical billing practices 
(to allow for the billing of an outpatient facility charge, in addition 
to the current billing of an outpatient professional charge) for seven 
percent of VA's billable facilities. More detail is provided in the 
section of this rulemaking that discusses the Regulatory Flexibility 
Act.

Sec.  17.100 Requirements for Provider-Based Status

    We propose to add a new regulation at 38 CFR 17.100. Section 17.100 
would be located under the undesignated center heading Charges, 
Waivers, and Collections and would be titled Requirements for provider-
based status.
    In proposed Sec.  17.100(a), we would describe a clear scope for 
establishing this section, which is to provide the criteria we would 
use to determine whether a VA medical facility has provider-based 
status for purposes of billing for nonservice-connected and non-special 
treatment authority conditions. We would also explain that while these 
requirements are modeled after the requirements established in the CMS 
regulation, 42 CFR 413.65, there are some differences that are designed 
to address the unique operational activities of the VA health care 
system.
    Proposed Sec.  17.100(b) would contain the definitions that would 
apply to this section. While some of these terms are based on those 
definitions in the CMS regulation, most are defined in the context of 
VA's unique structure and organization as indicated within the 
discussions of each proposed definition below. This ensures that we use 
the definitions and terminology that are

[[Page 64237]]

most appropriate and applicable to VA's health care system.
    Community Based Outpatient Clinic (CBOC) would be defined as a VA-
operated, VA-funded, or VA-reimbursed site of care that is not located 
within a VA Medical Center. We would further explain that a CBOC can 
provide primary, specialty, subspecialty, mental health, or any 
combination of health care delivery services that can be appropriately 
provided in an outpatient setting. A CBOC is unique to VA, and would be 
consistent with other VA definitions or uses of the term.
    Community Living Center (CLC) would be defined as a component of 
the spectrum of long-term care that provides a skilled nursing 
environment and houses a variety of specialty programs, such as respite 
care, dementia care, and skilled nursing care, for persons needing 
short and long stay services. We would further explain that CLCs are 
typically located on or near a VA medical facility and are VA-owned and 
operated, but may be free-standing in the community. This definition of 
CLC would be consistent with other VA definitions or uses of the term.
    Facility would be defined as a point of care where individuals can 
seek health care services, to include a VA Medical Center, CBOC, Health 
Care Center, CLC, and Other Outpatient Services site. This definition 
would specifically reference the facilities within VA that currently 
provide health care services.
    Health Care Center (HCC) would be defined as a VA-owned, VA-leased, 
VA-contracted, or shared clinic that is operational at least five days 
per week and provides primary care, mental health care, on site 
specialty services, and performs ambulatory surgery and/or invasive 
procedures that may require moderate sedation or general anesthesia. 
This definition would be consistent with other VA definitions or uses 
of the term, and is defined to reflect VA's organization and structure.
    Main Provider (or parent facility/hospital or PBH) would be defined 
as a provider that either creates, or acquires ownership of, another 
facility to deliver additional health care services under its name, 
ownership, and financial and administrative control. This is consistent 
with the CMS definition of main provider in 42 CFR 413.65(a)(2). We 
note that VA generally refers to its main providers as provider-based 
hospitals (PBHs). Although these facilities operate as main providers 
operate in the private sector and are not subordinate facilities that 
would seek provider-based status, VA has historically referred to them 
as PBHs. For clarity, we will refer to these facilities as main 
providers in the preamble and regulation text. We would further explain 
that VAMCs and HCCs can be main providers. This definition would 
reflect VA's organization and structure, and reference those facilities 
within VA that are examples of main providers.
    Other Outpatient Services (OOS) would be defined as a site that 
provides outpatient services to veterans, but does not meet the 
definition of a CBOC or HCC. This definition would be consistent with 
other VA definitions or uses of the term, as well as VA's structure and 
organization. Examples of OOS can include sleep centers, post-traumatic 
stress disorder clinics, and a clinic without primary care or mental 
health services.
    Prospective Payment System (PPS) would be defined as a method of 
reimbursement in which Medicare payment is made based on a 
predetermined, fixed amount. The payment amount for a particular 
service is derived based on the classification system of that service 
(for example, Medicare Severity Diagnosis-Related Groups for inpatient 
hospital services furnished by most acute care hospitals). This 
definition would be consistent with the definition used by CMS.
    Provider-Based Outpatient Facility (PBO) would be defined as a 
provider of health care services that is either created by, or acquired 
by, a main provider for the purpose of furnishing additional health 
care services under the ownership, administrative, and financial 
control of the main provider and meets the criteria outlined in this 
section. CMS does not define the general term of provider-based 
outpatient facility and instead, CMS separately defines the types of 
facilities or entities that could obtain provider-based status, to 
include department of a provider, provider-based entity, and remote 
location of a hospital. However, for the purposes of VA, it is not 
necessary to distinguish between the different types of facilities, and 
therefore, VA will have one term to broadly encompass all provider-
based outpatient facilities.
    Remote Location of a Hospital would be a CBOC, OOS site, or HCC 
that is located offsite from the main facility. This definition would 
differ from the definition provided in 42 CFR 413.65 in order to 
specifically define this term within the context of VA's facilities and 
reflect VA's unique organization and structure.
    VA Medical Center (VAMC) would be defined as a VA facility that 
provides at least two categories of care (inpatient, outpatient, 
residential, or institutional extended care). This definition would be 
consistent with other VA definitions or uses of the term, as well as 
VA's structure and organization.
    In proposed Sec.  17.100(c), we would set forth the criteria that 
would be used to determine whether a facility has provider-based status 
for purposes of billing for nonservice-connected and non-special 
treatment authority conditions. Section 17.100(c) is largely modeled 
after the requirements for all facilities or organizations in 42 CFR 
413.65(d), additional requirements applicable to off-campus facilities 
or organizations in 42 CFR 413.65(e), and obligations of hospital 
outpatient departments and hospital-based entities in 42 CFR 413.65(g).
    In proposed Sec.  17.100(c)(1), we would require that the facility 
seeking provider-based status and the main provider operate under the 
same license. This requirement would be consistent with the CMS 
provider-based criteria located at 42 CFR 413.65(d)(1), which generally 
requires a department of a provider, the remote location of a hospital, 
or the satellite facility and the main provider operate under the same 
license. As previously explained, VA is not distinguishing between 
departments of providers, remote locations of a hospital, satellite 
facilities, and other provider-based facilities. Therefore, proposed 
paragraph (c)(1) would state that the facility seeking provider-based 
status and the main provider operate under the same license. Because VA 
is a Federal entity, VA facilities are not licensed, and are not 
required to be licensed, under any State laws or other State 
authorities. Therefore, we would also explain that VA facilities are 
not licensed by States but are considered licensed by VA for the 
purpose of collection and recovery as part of VA's national 
organization structure and in accordance with VA standards, including 
those recognized by VA's Office of the Medical Inspector and Inspector 
General, as well as standards of major healthcare accreditation 
organizations such as The Joint Commission as applicable to specific VA 
facilities.
    In proposed Sec.  17.100(c)(2), we would require that the clinical 
services of the facility seeking provider-based status and the main 
provider be integrated. We would further explain that integration is 
demonstrated by several factors, which would be listed in the 
regulation. These factors would include (1) the professional staff at 
the facility seeking provider-based status has clinical privileges at 
the main provider; (2) the main provider maintains the same

[[Page 64238]]

monitoring and oversight (i.e. credentialing and privileging) of the 
facility seeking provider-based status as it does for any other 
department of the provider; (3) the medical director of the facility 
seeking provider-based status maintains a reporting relationship with 
the chief medical officer or other similar official of the main 
provider that has the same frequency, intensity, and level of 
accountability that exists in the relationship between the medical 
director of a department of the main provider and the chief medical 
officer or other similar official of the main provider, and is under 
the same type of supervision and accountability as any other director, 
medical or otherwise, of the main provider; (4) the medical staff 
committees or other professional committees at the main provider are 
responsible for medical activities in the facility seeking provider-
based status, including quality assurance, utilization review, and the 
coordination and integration of services, to the extent practicable, 
between the facility seeking provider-based status and the main 
provider; (5) the medical records for patients treated in the facility 
are integrated into a unified retrieval system (or cross reference) of 
the main provider; (6) inpatient and outpatient services of the 
facility seeking provider-based status and the main provider are 
integrated, and patients treated at the facility who require further 
care have full access to all services of the main provider and are 
referred where appropriate to the corresponding inpatient or outpatient 
department or service of the main provider; and (7) inpatient and 
outpatient services of the facility seeking provider-based status and 
the main provider are recognized under the main provider's 
accreditation. The first six factors would be consistent with the CMS 
criteria located at 42 CFR 413.65(d)(2). However, the seventh factor, 
regarding accreditation, would be additional factor that demonstrates 
integration for VA facilities. This would reflect the unique structure 
and organization of VA, in which inpatient and outpatient services of 
VA facilities are recognized under the main provider's accreditation.
    In proposed Sec.  17.100(c)(3), we would propose to require 
financial integration of the facility seeking provider-based status and 
the main provider. Specifically, we would require that the financial 
operations of the facility seeking provider-based status are fully 
integrated within the financial system of the main provider, as 
evidenced by shared income and expenses between the main provider and 
the facility. We would also require that the costs of a facility that 
is a hospital department be reported in a cost center of the provider, 
costs of a provider-based facility other than a hospital department be 
reported in the appropriate cost center or cost centers of the main 
provider. This would be consistent with CMS requirements in 42 CFR 
413.65(d)(3). However, we would also require that the main provider's 
integrated health care system manpower and labor budget and the 
financial status of any provider-based facility be incorporated and 
readily identified in the main provider's integrated system reports. 
This additional requirement would reflect that the main provider has 
administrative and financial control of the provider-based facility, 
and would be consistent with similar CMS requirements in 42 CFR 
413.65(d)(3). This would reflect VA's current structure and 
organization in which a main provider has such control, particularly 
budgetary, over facilities.
    Under proposed Sec.  17.100(c)(4), we would include a requirement 
for public awareness. Specifically, we would require that the facility 
seeking provider-based status be held out to the public (and other 
payers) as part of the main provider. This would be exhibited by the 
patients of the facility being made aware that the facility is part of 
a main provider and that they will be billed accordingly. This would be 
consistent with the CMS requirement for public awareness in 42 CFR 
413.65(d)(4). In addition, we would also propose that all literature, 
brochures, and public relations newsletters from the facility seeking 
provider-based status include the relationship between the main 
provider and the facility. This is current VA practice for facilities 
associated or affiliated with a main provider and reflects the 
relationship between the facilities.
    Proposed Sec.  17.100(c)(5) would contain obligations when the 
facility seeking provider-based status is a hospital outpatient 
department or hospital-based entity, including (1) compliance with the 
``antidumping'' rules of 42 CFR 489.20(l), (m), (q), and (r) and 42 CFR 
489.24; (2) physician services must be billed with the correct site-of-
service so that appropriate physician and practitioner amounts can be 
determined; (3) physicians are obligated to comply with the non-
discrimination provisions in 42 CFR 489.10; (4) the facility seeking 
provider-based status must treat all Medicare patients seen on an 
urgent/emergent basis as hospital outpatients; (5) in the case of a 
patient admitted to the hospital as an inpatient after receiving 
treatment in the hospital outpatient department or hospital-based 
facility, payments for services in the hospital outpatient department 
of hospital-based facility are subject to the payment window provisions 
applicable to PPS hospitals and to hospitals and units excluded from 
PPS set forth at 42 CFR 412.2(c)(5) and at 42 CFR 413.40(c)(2), 
respectively; (6) the hospital outpatient department must meet 
applicable VA policy pertaining to hospital health and safety programs; 
and (7) VA must treat any facility that is located on the main hospital 
campus as a department of the hospital. The criteria described in (1)-
(7) are largely consistent with CMS regulations at Sec.  413.65(d)(5) 
and (g).
    We note that we would not propose to include all of the criteria 
located at Sec.  413.65(g), Obligations of hospital outpatient 
departments and hospital-based entities, because some of the 
requirements are not applicable to VA. For example, Sec.  413.65(g)(3) 
(hospital outpatient departments must comply with all the terms of the 
hospital's provider agreement) and Sec.  413.65(g)(7) (when a Medicare 
beneficiary is treated in a hospital outpatient department that is not 
located on the main provider's campus, the treatment is not required to 
be provided by the ``antidumping'' rules in Sec.  489.24 of this 
chapter, and the beneficiary will incur a coinsurance liability for an 
outpatient visit to the hospital as well as for the physician service, 
certain requirements must be met) are not included because they are not 
applicable.
    In proposed Sec.  17.100(c)(6), we would include the requirement 
that the facility seeking provider-based status is operated under the 
control of the main provider. Such control would require (1) the main 
provider and the facility seeking provider-based status have the same 
governing body; (2) the facility seeking provider-based status is 
operated under the same organizational documents as the main provider 
(e.g. the facility is subject to common bylaws and operating decisions 
of the main provider's governing body); (3) the main provider has final 
responsibility for administrative decisions, final approval for 
contracts with outside parties, final approval for personnel actions, 
final responsibility for personnel policies (such as code of conduct), 
and final approval for medical staff appointments in the facility 
seeking provider-based status. This is modeled after the criteria in 
Sec.  413.65(e)(1) which requires operation under the ownership and 
control of the main provider as an additional requirement applicable to 
off-campus facilities or organizations. However, we propose to remove 
the

[[Page 64239]]

ownership requirements because, in the VA structure, main providers do 
not own other facilities.
    Proposed Sec.  17.100(c)(7) would establish the requirement for 
administration and supervision of the facility seeking provider-based 
status. Significantly, the reporting relationship between the facility 
seeking provider-based status and the main provider must have the same 
frequency, intensity, and level of accountability that exists in the 
relationship between the main provider and one of its existing 
departments, as evidenced by compliance with further identified 
requirements. These include (1) the facility seeking provider-based 
status must be under the direct supervision of the main provider, (2) 
the facility seeking provider-based status must be operated under the 
same monitoring and oversight by the main provider as any other 
department of the provider and is operated just as any other department 
of the provider with regard to supervision and accountability; and (3) 
administrative functions (i.e. billing services, records, human 
resources, payroll, employee benefit package, salary structure, and 
purchasing services) of the facility seeking provider-based status are 
integrated with those of the main provider.
    We would further explain that as part of the requirement for the 
same monitoring and oversight located in proposed Sec.  
17.100(c)(7)(ii), the facility director or individual responsibility 
for daily operations at the facility must maintain a reporting 
relationship with a manager at the main provider that has the same 
frequency, intensity and level of accountability that exists in the 
relationship between the main provider and its existing departments, 
and is accountable to the governing body of the main provider, in the 
same manner as any department head of the provider. In addition, we 
would explain that the requirement of integrated administrative 
functions, as set forth in proposed Sec.  17.100(c)(7)(iii), includes 
that either the same employees or group of employees handle the 
identified administrative functions for the facility and main provider, 
or those functions are contracted out under the same contract 
agreement; or are handled under different contract agreements, with the 
contract of the facility or organization being managed by the main 
provider. The criteria under proposed Sec.  17.100(c)(7) are consistent 
with those under the CMS regulations at 42 CFR 413.65(e)(2).
    Lastly, under proposed Sec.  17.100(d), we would illustrate how the 
criteria are applied when VA does not own the facility, but operates 
under a contract, and in the situation when the employees at a VA 
facility are contract employees. We would explain that, (1) a VA 
facility that is seeking provider-based status that exists under 
contract arrangements, where only VA patients are seen, may be 
designated as provider-based as long as the provider-based requirements 
in this section are met; (2) A VA facility seeking provider-based 
status that exists under contract arrangements, where VA patients and 
non-VA patients are seen at the same non-VA owned facility, will have 
the same provider-based status as the non-VA owned facility that is 
hosting the VA facility; and (3) a VA owned and operated facility 
seeking provider-based status, where some or all of the staff are 
contracted employees, may be designated as provider-based as long as 
the provider-based requirements in this section are met. This is 
because the facility is still considered VA owned and operated, 
regardless of whether the staff is contracted or not.
    The CMS requirements include numerous other provisions that are 
applicable to private health care systems, but are not applicable to 
the VA health care system. For example, in the proposed rulemaking we 
are not including the information in 42 CFR 413.65(b) or (c) on what is 
required to seek a determination of provider-based status from CMS and 
what is required for reporting material changes in relationships to 
CMS, because VA and not CMS will make the determination of whether a VA 
facility has provider-based status.
    In addition, this proposed rulemaking does not include the CMS 
criteria at 42 CFR 413.65(e)(3) regarding location requirements. These 
include, generally, that the facility is located within a 35 mile 
radius of the campus of the potential main provider or that the 
facility is owned and operated by a hospital that has a 
disproportionate share adjustment greater than 11.75 percent and that 
the facility demonstrates a high level of integration with the main 
provider by showing that it serves the same patient population as the 
main provider. Although in the private sector, mileage between the main 
provider and the facility seeking provider-based status demonstrates a 
level of integration, we believe that the same is not true for VA.
    VA is a nationwide health care system that is structured to require 
all facilities that are not main providers be controlled by and 
financially and administratively integrated with the main provider in 
its region, regardless of mileage. In this regard, each designated 
region has one main provider and when VA acquires or creates a new 
facility (that is not a main provider), the new facility is 
automatically paired with the main provider that is in its region. The 
new facility is assigned a shared station number with the main provider 
that has a unique suffix and is under the main provider's control. We 
emphasize that the pairing is only based on location to the extent that 
the new facility is within the main provider's region; it does not 
depend upon a certain mileage requirement. For example, in the State of 
Maine, there is one main provider and all other facilities, regardless 
of distance from the main provider, are administratively and 
financially integrated with and controlled by the main provider. It 
does not matter whether the facility is 20 miles away or 200 miles 
away. Therefore, VA believes that the location requirement is not a 
relevant criterion to determine integration within the VA system.
    Moreover, the proposed rulemaking does not include the requirements 
for joint ventures under 42 CFR 413.65(f), management contracts under 
42 CFR 413.65(h), inappropriate treatment of a facility or organization 
as provider-based under 42 CFR 413.65(j), temporary treatment as 
provider-based under 42 CFR 413.65(k), correction of errors under 42 
CFR 413.65(l), the status of Indian Health Service and Tribal 
facilities and organizations under 42 CFR 413.65(m), FQHCs and look 
alikes under 42 CFR 413.65(n), and effective date of provider-based 
status under 42 CFR 413.65(o). VA believes that these provisions are 
not pertinent to VA's structure as a national health care system for 
veterans, and therefore, we will not include these or similarly not 
relevant provisions into the proposed rulemaking.

Sec.  17.101 Collection or Recovery by VA for Medical Care or Services 
Provided or Furnished to a Veteran for a Nonservice-Connected 
Disability

    We propose to revise Sec.  17.101(a)(5) by removing the definitions 
of provider-based and non-provider-based. The term provider-based 
outpatient facility will be defined in Sec.  17.100(b)(2). Therefore, 
we do not believe that it needs to be defined in Sec.  17.101. We also 
propose to remove the definition of non-provider-based. CMS does not 
define that term in Sec.  413.65 and we do not believe it is necessary 
to define. If a facility does not meet the criteria in Sec.  17.100, 
the facility will simply not have provider-based status.
    We propose to amend Sec.  17.101(a) by first stating that the 
paragraph will cover charges related to provider-based

[[Page 64240]]

status. We would explain that facilities that have provider-based 
status by meet the criteria in Sec.  17.100 would be entitled to bill 
outpatient facility charges and professional charges. The professional 
charges for these facilities would be produced by the methodologies set 
forth in this section based on facility expense RVUs. Facilities that 
do not have provider-based status because it did not meet the criteria 
in Sec.  17.100 would not be permitted to bill outpatient facility 
charges and could only bill a professional charge. The professional 
charges for these facilities would be produced by the methodologies set 
forth in this section based on non-facility practice expense RVUs.

Sec.  17.106 VA Collection Rules; Third-Party Payers

    As previously discussed, under 38 U.S.C. 1729, VA has the right to 
recover or collect reasonable charges for medical care or services from 
a third party under four circumstances. In addition, section 1729(f) 
provides that no law of any State or of any political subdivision of a 
State, and no provision of any contract or other agreement, shall 
operate to prevent recovery or collection by the United States under 
this section or with respect to care or services furnished under 
section 1784 of this title. VA has established rules for third party 
payers in 38 CFR 17.106. Specifically, Sec.  17.106(f) contains the 
general rules for the administration of section 1729 and this part, 
with clarifying examples of when a third-party may not reduce, offset, 
or request a refund for payments made to VA. Section 17.106(f)(2) 
explicitly provides that the list of examples is not exclusive. We 
propose to add another example to 38 CFR 17.106(f)(2) to clarify that 
third parties cannot reduce or refuse payment based on VA's designation 
that a facility is provider-based.

Effect of Rulemaking

    The Code of Federal Regulations, as proposed to be revised by this 
proposed rulemaking, would represent the exclusive legal authority on 
this subject. No contrary rules or procedures would be authorized. All 
VA guidance would be read to conform with this proposed rulemaking if 
possible or, if not possible, such guidance would be superseded by this 
rulemaking.

Paperwork Reduction Act

    This rule contains no collections of information under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
facilities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. Over 90 per cent of VA's current billing facilities 
presently engage in the practices that would be enabled by this rule 
for a remaining small percentage of VA facilities. Additionally, while 
the rule would allow for recognition of an additional set of billable 
charges for the small percentage of VA facilities that to not already 
engage in such practices, the rule would not guarantee such charges 
would be paid by third parties or collected by VA. The estimated 
average annual potential impact of less than $4 million would otherwise 
not be significant when considered to apply to the aggregate of typical 
third-party insurers or payers in the U.S. health care industry at 
large. Therefore, pursuant to 5 U.S.C. 605(b), this rule is exempt from 
the initial and final regulatory flexibility analysis requirements of 5 
U.S.C. 603 and 604.

Executive Orders 12866, 13563, and 13771

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility.
    The Office of Management and Budget has examined the economic, 
interagency, budgetary, legal, and policy implications of this 
regulatory action and determined that it is a significant regulatory 
action under Executive Order 12866, because it raises novel legal or 
policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this Executive Order. VA's 
impact analysis can be found as a supporting document at http://
www.regulations.gov, usually within 48 hours after the rulemaking 
document is published. Additionally, a copy of the rulemaking and its 
impact analysis are available on VA's website at http://www.va.gov/orpm 
by following the link for VA Regulations Published from FY 2004 through 
FYTD.
    This proposed rule is not subject to the requirements of E.O. 13771 
because this proposed rule results in no more than de minimis costs.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This proposed rule is not likely to have 
such effect on State, local, and tribal governments, or on the private 
sector.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.008--Veterans Domiciliary 
Care; 64.011--Veterans Dental Care; 64.012--Veterans Prescription 
Service; 64.013--Veterans Prosthetic Appliances; 64.014--Veterans State 
Domiciliary Care; 64.015--Veterans State Nursing Home Care; 64.026--
Veterans State Adult Day Health Care; 64.039--CHAMPVA; 64.040--VHA 
Inpatient Medicine; 64.041--VHA Outpatient Specialty Care; 64.042--VHA 
Inpatient Surgery; 64.043--VHA Mental Health Residential; 64.044--VHA 
Home Care; 64.045--VHA Outpatient Ancillary Services; 64.046--VHA 
Inpatient Psychiatry; 64.047--VHA Primary Care; 64.048--VHA Mental 
Health clinics; 64.049--VHA Community Living Center; 64.050--VHA 
Diagnostic Care.

List of Subjects in 38 CFR Part 17

    Administrative practice and procedure, Alcohol abuse, Alcoholism, 
Claims, Day care, Dental health, Drug abuse, Health care, Health 
facilities, Health professions, Health records, Medical devices, 
Medical research, Mental health programs, Nursing homes, Philippines, 
Veterans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Robert L. 
Wilkie, Secretary, Department of Veterans Affairs, approved this

[[Page 64241]]

document on May 3, 2019, for publication.

Consuela Benjamin,
Regulations Development Coordinator, Office of Regulation Policy & 
Management, Office of the Secretary, Department of Veterans Affairs.

    For the reasons set out in the preamble, VA proposes to amend 38 
CFR part 17 as set forth below:

PART 17--MEDICAL

0
1. The authority citation for part 17 continues to read in part as 
follows:

    Authority:  38 U.S.C. 501, and as noted in specific sections.
* * * * *
0
2. Add Sec.  17.100 under the undesignated center heading ``Charges, 
Waivers, and Collections'' to read as follows:


Sec.  17.100  Requirements for provider-based status.

    (a) Scope. This section establishes the criteria that VA uses to 
determine whether a VA medical facility is designated as provider-based 
for purposes of billing for non-service-connected and non-special 
treatment authority conditions.
    (b) Definitions. For purposes of this section:
    Community Based Outpatient Clinic (CBOC). A CBOC is a VA-operated, 
VA-funded, or VA-reimbursed site of care that is not located within a 
VA Medical Center. A CBOC can provide primary, specialty, subspecialty, 
mental health, or any combination of health care delivery services that 
can be appropriately provided in an outpatient setting.
    Community Living Center (CLC). A CLC is a component of the spectrum 
of long-term care that provides a skilled nursing environment and 
houses a variety of specialty programs for persons needing short and 
long stay services. VA CLCs are typically located on, or near a VA 
medical facility and are VA-owned and operated, but may be free-
standing in the community.
    Facility. A facility is a point of care where individuals can seek 
VA health care services, to include a VA Medical Center, CBOC, Health 
Care Center, CLC, and Other Outpatient Services site.
    Health Care Center (HCC). An HCC is a VA-owned, VA-leased, VA-
contracted or shared clinic that is operational at least five days per 
week and provides primary care, mental health care, on site specialty 
services, and performs ambulatory surgery and/or invasive procedures 
that may require moderate sedation or general anesthesia.
    Main provider. A main provider (or parent facility/hospital or 
provider-based hospital (PBH)) is a provider that either creates, or 
acquires ownership of, another facility to deliver additional health 
care services under its name, ownership, and financial and 
administrative control. For example, VA Medical Centers and HCCs can be 
main providers.
    Other Outpatient Services (OOS). A site that provides outpatient 
services to veterans, but does not meet the definition of a CBOC or HCC 
per this section.
    Prospective Payment System (PPS). A Prospective Payment System 
(PPS) is a method of reimbursement in which Medicare payment is made 
based on a predetermined, fixed amount. The payment amount for a 
particular service is derived based on the classification system of 
that service (for example, Medicare Severity Diagnosis-Related Groups 
for inpatient hospital services furnished by most acute care 
hospitals).
    Provider-based outpatient facility (PBO). A provider-based 
outpatient facility is a provider of health care services that is 
either created by, or acquired by, a main provider for the purpose of 
furnishing additional health care services under the ownership, 
administrative, and financial control of the main provider, and meets 
the criteria outlined in this section.
    Remote location of a hospital. A remote location of a hospital is a 
CBOC, OOS Site, or HCC that is located offsite from the main facility.
    VA Medical Center (VAMC). A VAMC is a VA facility that provides at 
least two categories of care (inpatient, outpatient, residential, or 
institutional extended care).
    (c) Criteria for provider-based status. In order to be designated 
as a provider-based facility, the following criteria must be met:
    (1) Licensure. The facility seeking provider-based status and the 
main provider must operate under the same license. VA facilities are 
not licensed by States but all VA facilities are considered licensed 
for the purpose of collection and recovery by VA as part of VA's 
national organization structure and in accordance with VA standards, 
including standards established or recognized by VA's Offices of the 
Medical Inspector and Inspector General and major healthcare 
accreditation organizations.
    (2) Clinical services. The clinical services of the facility 
seeking provider-based status and the main provider must be integrated. 
Integration is demonstrated by the following:
    (i) The professional staff of the facility has clinical privileges 
at the main provider.
    (ii) The main provider maintains the same monitoring and oversight 
(i.e. credentialing and privileging) of the facility seeking provider-
based status as it does for any other department of the provider.
    (iii) The medical director of the facility seeking provider-based 
status maintains a reporting relationship with the chief medical 
officer or other similar official of the main provider that has the 
same frequency, intensity, and level of accountability that exists in 
the relationship between the medical director of a department of the 
main provider and the chief medical officer or other similar official 
of the main provider, and is under the same type of supervision and 
accountability as any other director, medical or otherwise, of the main 
provider.
    (iv) The medical staff committees or other professional committees 
at the main provider are responsible for medical activities in the 
facility seeking provider-based status, including quality assurance, 
utilization review, and the coordination and integration of services, 
to the extent practicable, between the facility seeking provider-based 
status and the main provider.
    (v) Medical records for patients treated in the facility seeking 
provider-based status are integrated into a unified retrieval system 
(or cross reference) of the main provider.
    (vi) Inpatient and outpatient services of the facility seeking 
provider-based status and the main provider are integrated, and 
patients treated at the facility who require further care have full 
access to all services of the main provider and are referred where 
appropriate to the corresponding inpatient or outpatient department or 
service of the main provider.
    (vii) Inpatient and outpatient services of the facility seeking 
provider-based status and the main provider are recognized under the 
main provider's accreditation.
    (3) Financial integration. The financial operations of the facility 
seeking provider-based status are fully integrated within the financial 
system of the main provider, as evidenced by shared income and expenses 
between the main provider and the facility. The costs of a facility 
that is a hospital department are reported in a cost center of the 
provider, costs of a facility other than a hospital department are 
reported in the appropriate cost center or cost centers of the main 
provider. The main provider's integrated health care system manpower 
and labor budget and the

[[Page 64242]]

financial status of any facility seeking provider-based status is 
incorporated and readily identified in the main provider's integrated 
system reports.
    (4) Public awareness. The facility seeking provider-based status 
must be held out to the public (and other payers) as part of the main 
provider. Patients of the facility must be made aware that the facility 
is part of a main provider and that they will be billed accordingly. 
All literature, brochures, and public relations newsletters from the 
facility seeking provider-based status must provide the relationship 
between the main provider and the facility.
    (5) Obligations of hospital outpatient departments and hospital-
based facilities. If the facility seeking provider-based status is a 
hospital outpatient department or hospital-based facility, the facility 
must fulfill the obligations described in this paragraph:
    (i) The hospital outpatient department must comply with the 
antidumping rules of 42 CFR 489.20(l), (m), (q), and (r) and Sec.  
489.24.
    (ii) Physician services furnished in hospital outpatient 
departments or hospital-based facilities must be billed with the 
correct site-of-service so that appropriate physician and practitioner 
payment amounts can be determined based on their geographical location.
    (iii) Physicians who work in hospital outpatient departments or 
hospital-based facilities are obligated to comply with the non-
discrimination provisions in 42 CFR 489.10(b).
    (iv) Hospital outpatient departments must treat all Medicare 
patients seen on an urgent/emergent basis as hospital outpatients.
    (v) In the case of a patient admitted to the hospital as an 
inpatient after receiving treatment in the hospital outpatient 
department or hospital-based facility, payments for services in the 
hospital outpatient department or hospital-based facility are subject 
to the payment window provisions applicable to PPS hospitals and to 
hospitals and units excluded from PPS set forth at 42 CFR 412.2(c)(5) 
and at 42 CFR 413.40(c)(2), respectively.
    (vi) The hospital outpatient department must meet applicable VA 
policies pertaining to hospital health and safety programs.
    (vii) VA must treat any facility that is located on the main 
hospital campus as a department of the hospital.
    (6) Operation under the control of the main provider. The facility 
seeking provider-based status is operated under the control of the main 
provider. Control of the main provider requires:
    (i) The main provider and the facility seeking provider-based 
status have the same governing body.
    (ii) The facility seeking provider-based status is operated under 
the same organizational documents as the main provider. For example, 
the facility seeking provider-based status must be subject to common 
bylaws and operating decisions of the governing body of the main 
provider.
    (iii) The main provider has final responsibility for administrative 
decisions, final approval for contracts with outside parties, final 
approval for personnel actions, final responsibility for personnel 
policies (such as code of conduct), and final approval for medical 
staff appointments in the facility seeking provider-based status.
    (7) Administration and Supervision. The reporting relationship 
between the facility seeking provider-based status and the main 
provider must have the same frequency, intensity, and level of 
accountability that exists in the relationship between the main 
provider and one of its existing departments, as evidenced by 
compliance with all of the following requirements:
    (i) The facility seeking provider-based status is under the direct 
supervision of the main provider.
    (ii) The facility seeking provider-based status is operated under 
the same monitoring and oversight by the main provider as any other 
department of the provider, and is operated just as any other 
department of the provider with regard to supervision and 
accountability. The facility director or individual responsible for 
daily operations at the facility:
    (A) Maintains a reporting relationship with a manager at the main 
provider that has the same frequency, intensity, and level of 
accountability that exists in the relationship between the main 
provider and its existing departments; and
    (B) Is accountable to the governing body of the main provider, in 
the same manner as any department head of the provider.
    (iii) The following administrative functions of the facility 
seeking provider-based status are integrated with those of the main 
provider where the facility is based: billing services, records, human 
resources, payroll, employee benefit package, salary structure, and 
purchasing services. Either the same employees or group of employees 
handle these administrative functions for the facility and the main 
provider, or the administrative functions for both the facility and the 
main provider are contracted out under the same contract agreement; or 
are handled under different contract agreements, with the contract of 
the facility or organization being managed by the main provider.
    (d) Illustrations of how the criteria are applied. (1) A VA 
facility that is seeking provider-based status that exists under 
contract arrangements, where only VA patients are seen, may be 
designated as provider-based if the provider-based requirements in this 
section are met.
    (2) A VA facility seeking provider-based status that exists under 
contract arrangements, where VA patients and non-VA patients are seen 
at the same non-VA owned facility, will have the same provider-based 
status as the non-VA owned facility that is hosting the VA facility.
    (3) A VA owned and operated facility seeking provider-based status, 
where some or all of the staff are contracted employees, may be 
designated as provider-based if the provider-based requirements in this 
section are met.
0
2. Amend Sec.  17.101 by:
0
a. Revising the section heading;
0
b. Removing the definitions ``Non-provider-based'' and ``Provider-
based'' from paragraph (a)(5); and
0
c. Revising paragraph (a)(6).
    The revisions read as follows:


Sec.  17.101  Collection or recovery by VA for medical care or services 
provided or furnished to a veteran for a non-service connected 
disability.

    (a) * * *
    (6) Provider-based status and charges. Facilities that have 
provider-based status by meeting the criteria in Sec.  17.100 are 
entitled to bill outpatient facility charges and professional charges. 
The professional charges for these facilities are produced by the 
methodologies set forth in this section based on facility expense RVUs. 
Facilities that do not have provider-based status because they do not 
meet the criteria in Sec.  17.100 are not permitted to bill outpatient 
facility charges and can only bill a professional charge. The 
professional charges for these facilities are produced by the 
methodologies set forth in this section based on non-facility practice 
expense RVUs.
* * * * *
0
3. Amend Sec.  17.106 by adding paragraph (f)(2)(viii) to read as 
follows:


Sec.  17.106   VA collection rules; third-party payers.

* * * * *
    (f) * * *
    (2) * * *
    (viii) A third party may not reduce or refuse payment if the 
facility where the medical treatment was furnished is designated by VA 
as provider-based, but

[[Page 64243]]

the facility does not meet the provider-based status requirements under 
42 CFR 413.65 Centers.
* * * * *

[FR Doc. 2019-24880 Filed 11-20-19; 8:45 am]
 BILLING CODE 8320-01-P