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CMS draft guidance on co-location arrangements: What hospitals and health care entities need to know

Milada Goturi May 29, 2019

Many hospitals share space with other providers. Previously, CMS’ guidance on the permissibility of such arrangements was informal and could vary by Regional Office. On May 3, 2019, CMS issued long-awaited draft guidance addressing such co-location arrangements (“Draft Guidance”). The Draft Guidance provides some clarification on how a hospital can share space, services, staff and emergency services and still demonstrate independent compliance with the Medicare Conditions of Participation for hospitals (“COPs”). The Draft Guidance reflects both recognition by CMS that co-location arrangements exist today and an effort by CMS to offer some flexibility on structuring such arrangements. 

Distinct and shared spaces

CMS defines co-location as “two hospitals or a hospital and another healthcare entity [which] are located on the same campus or in the same building and share space, staff, or services.” The concerns with such arrangements primarily relate to the co-located hospital being able to demonstrate compliance with the COPs. While the Draft Guidance signals that CMS is willing to recognize certain co-location arrangements, it also makes clear that CMS does not permit sharing of clinical spaces. CMS reaffirms that a hospital must have “defined and distinct spaces of operation for which it maintains control at all times,” which includes clinical spaces for patient care. Examples of such clinical spaces include laboratories, pharmacies, imaging services, operating rooms, outpatient clinics, post-anesthesia care units, and emergency departments. The rationale here is largely grounded in patient safety and confidentiality concerns. 

Conversely, CMS is providing more flexibility when considering shared use of public spaces and public paths of travel by co-located hospitals or health care entities. Examples of such spaces include public lobbies, waiting rooms and reception areas (with separate check-in areas and clear signage), public restrooms, staff lounges, elevators, and main entrances to a building. The Draft Guidance identifies as an impermissible path of travel the travel through a clinical space (e.g., a hallway through a nursing unit) and as a permissible path of travel the through public space (e.g., as through the main hospital lobby).

Contracted services

In the Draft Guidance CMS indicates that certain hospital services may be provided through a contract with another co-located hospital or other entity. The Draft Guidance affirms previously articulated views that services such as food preparation, housekeeping, laboratory services, and utility services (e.g., fire detection and suppression, medical gases, suction, compressed air, and alarm systems) can be contracted services. 

The Draft Guidance indicates that medical staff members with clinical privileges at each co-located health care entity may “float” between them. However, other care providers may not “float” between the two facilities during a single shift. CMS opined that if such essential staff were to “float” between entities, neither co-located facility would meet the COP requirements. 

In addition, when a hospital uses contracted services, the hospital’s governing body must be able to:

(1) verify that any contracted clinical services are not being simultaneously “shared” with another hospital or entity, 

(2) demonstrate how the hospital monitors the performance of its contracted services, and 

(3) demonstrate how the hospital ensures that all individuals providing services under contract have been oriented and trained consistent with hospital policies and procedures.

Emergency services

Under the COPs, hospitals without an emergency department are still required to have appropriate policies and procedures to address emergencies 24 hours a day and seven days per week. The Draft Guidance indicates that these hospitals are allowed to contract with another hospital or entity for appraisal and initial treatment of patients experiencing emergencies, but the contracted staff may not be working or be on duty simultaneously at another hospital or healthcare entity. The Draft Guidance indicates, however, that hospitals without emergency departments that are co-located with another hospital may not arrange to have that other hospital respond to its emergencies. 

The Draft Guidance states that it is acceptable to transfer patients to co-located entities for continuation of care. The Draft Guidance further states that hospitals without an emergency department that contract for emergency services with another hospital’s emergency department are considered to provide emergency services and must comply with EMTALA. However, the full scope of this provision and its implications for hospitals is not clear and would require further clarification from CMS.

CMS is seeking comments to the Draft Guidance by July 2, 2019, prior to issuing final guidance. If you would like assistance in submitting comments to CMS, please contact one of the authors of this post.

Milada Goturi is a partner in Thompson Coburn's health care practice.