Blogs > The Legal Diagnosis

Continued Uncertainty of Provider-Based Status in Space Sharing Arrangements

health care practitioners Medicare demand for overpayment

Space sharing and co-location arrangements have been popular service delivery models for hospitals and independent physician practices.  These arrangements enhance patient convenience, improve continuity of care and present cost sharing benefits to the parties involved.  However, Medicare rules related to hospital provider-based department status and the Pennsylvania Department of Health (DOH) Guidance Regarding Hospital Outpatient Department – Shared Space arrangements have severely limited what space sharing arrangements will continue to qualify under Medicare’s Hospital Outpatient Department (HOPD) billing rules.

CMS guidance requires that hospitals be certified by Medicare in their entirety as a single provider, including any components or space off the main hospital campus.  The DOH has interpreted this to mean that shared space including entryways, interior hallways, bathroom facilities, treatment rooms, and registration areas are all indications that a purported hospital space is instead part of a larger component that does not qualify as a HOPD.  The DOH has stated, “Hospitals may not situate themselves inside a freestanding office space and consider certain services furnished therein as ‘hospital’ services while other services furnished within the same overall space are not hospital services” but instead independent physician services.  As a result, DOH is denying hospital requests to add provider-based locations to the state hospital license if it identifies uses of shared space either before or during the occupancy survey.  In addition, the DOH has advised that if they are on a complaint investigation, state licensure, recertification or validation survey, they will be evaluating provider-based locations for possible shared space issues.

The DOH Guidance document confirms that a separate hospital suite within a medical office building may be a singular component that complies with the Medicare provider-based status requirements and obligations, thus permitting HOPD billing rates for services provided in such separate suite locations.

If you have any questions about this post or related matters, please contact me at