On March 30, 2020, The U.S. Department of Health and Human Services (HHS) exercised its authority under Section 1135 of the Social Security Act (SSA) granting providers a series of blanket waivers¹ from existing Medicare program rules to permit hospitals, in coordination with other health care providers, to privately arrange and operate so-called Contractual Hospitals Without Walls that provide hospital services in other healthcare facilities and sites not currently considered to be part of a health care facility and set up temporary expansion sites to help address the urgent need to increase the capacity to care for patients. The Centers for Medicare & Medicaid (CMS) states the goal of these waivers is to help ensure that local hospitals and health systems have the capacity to handle a potential surge of COVID-19 patients through temporary expansion sites. Hospitals and others have shared concerns with CMS about capacity for treating patients during the COVID-19 Public Health Emergency (PHE), particularly those requiring ventilator and intensive care services.

The Section 1135 blanket waivers allow flexibility for hospitals to create surge capacity by allowing them to provide room and board, nursing and other hospital services at remote locations or sites not considered part of a healthcare facility such as hotels or community facilities. CMS states this flexibility will allow hospitals to separate COVID-19 positive patients from other non-COVID-19 patients to help efforts around infection control and preservation of personal protective equipment (PPE). While the blanket waivers will allow hospitals to screen patients at offsite locations and furnish inpatient and outpatient services at temporary expansion sites, CMS expects that hospitals must still control and exercise oversight authority for services provided at an alternative location.

Through the blanket waivers of Medicare hospital Conditions of Participation,² CMS will permit non-hospital buildings and space to be used for patient care and quarantine sites, provided that the location is approved by the state (ensuring that safety and comfort for patients and staff are sufficiently addressed) and so long as it is not inconsistent with a state’s emergency preparedness or pandemic plan. This allows for increased capacity and promotes appropriate separation and quarantining of COVID-19 patients from patients without COVID-19.

• Options for Otherwise Shuttered ASCs: Ambulatory surgery centers (ASCs) that have canceled elective surgeries and shuttered may either: (a) contract with local healthcare systems to provide hospital services or (b) directly enroll with CMS and bill as hospitals. Either action may last temporarily for the duration of the COVID-19 PHE and must also be consistent with their state’s emergency preparedness or pandemic plan. CMS suggests the new flexibilities may also leverage ASC locations to takeover services typically provided by hospitals such as cancer procedures, trauma surgeries and other essential surgeries.   
• ASC Temporary Enrollment as a Hospital: For Medicare-enrolled ASCs, CMS will permit those ASCs to temporarily enroll as hospitals and to provide hospital services to help address the urgent need to increase hospital capacity to take care of patients. At the same time, CMS goes further to suggest that other interested entities, such as freestanding emergency departments, could pursue enrolling as an ASC and then pursue converting their enrollment to hospital during the PHE. CMS is providing a greatly simplified process for those currently Medicare-certified ASCs that wish to enroll to receive temporary billing privileges as a hospital. Those ASCs are directed to call the COVID-19 Provider Enrollment Hotline to reach the appropriate Medicare contractor in its geographic area and then will complete and sign an attestation form specific to the COVID-19 PHE. Additional information is available at the cms.gov website.   
• HOPD Rule Changes: CMS is waiving certain requirements under the Medicare hospital Conditions of Participation and the provider-based department (HOPD) requirements³ to allow hospitals to establish and operate, as part of the hospital, any location meeting those conditions of participation for hospitals that are not also waived during the PHE. CMS states this waiver also allows hospitals to change the status of their current provider-based department locations to the extent necessary to address the needs of hospital patients as part of the state or local pandemic plan. The HOPD change extends to any entity operating as a hospital, whether a current hospital establishing a new location or an ASC enrolling as a hospital during the PHE (see above) if the relevant location meets the Conditions of Participation and other requirements not waived by CMS.
• Physician-owned Hospitals: CMS is temporarily allowing physician-owned hospitals to increase the number of their licensed beds, operating rooms and procedure rooms beyond existing Stark Law caps. For example, CMS states that a physician-owned hospital may temporarily convert observation beds to inpatient beds to accommodate patient surge during the COVID-19 PHE.
• Skilled Nursing Facilities (SNFs): For SNFs, the CMS blanket waivers cover:
  • Regulatory requirements⁴ to allow for a non-SNF building to be temporarily certified and available for use by an SNF in the event there are needs for isolation processes for COVID-19 positive residents, which may not be feasible in the existing SNF structure to ensure care and services during treatment for COVID-19 are available while protecting other vulnerable adults. CMS believes this will also provide another measure that will free up inpatient care beds at hospitals for the most acute patients while providing beds for those still in need of care. CMS will waive certain conditions of participation and certification requirements for opening a nursing facility if the state determines there is a need to quickly stand up a temporary COVID-19 isolation and treatment location. Possible locations could include hotels, college dormitories and other temporary locations.
  • Regulatory requirements⁵ to temporarily allow for rooms in a long-term care facility not normally used as a resident’s room, to be used to accommodate beds and residents for resident care in emergencies and situations needed to help with surge capacity. CMS states that rooms that may be used for this purpose include activity rooms, meeting/conference rooms, dining rooms or other rooms, as long as residents can be kept safe, comfortable and other applicable requirements for participation are met.
• COVID-19 Test Site: CMS will also allow hospitals, laboratories and other entities to perform tests for COVID-19 on people at home and in other community-based settings outside of the hospital. CMS believes this will both increase access to testing and reduce risks of exposure. The new guidance allows healthcare systems, hospitals and communities to set up testing sites exclusively for the purpose of identifying COVID-19-positive patients in a safe environment. CMS also will allow hospital emergency departments to test and screen patients for COVID-19 at drive-through and off-campus test sites.

Caution:  Before relying on these federal blanket waivers, providers also must carefully consider state and local health emergency measures. The CMS-prescribed measures can be followed only if they are not inconsistent with a state’s emergency preparedness or pandemic plan, or as directed by the local or state health departments. Therefore, providers interest in this opportunity must also confirm similar, separate flexibility in the applicable state’s emergency preparedness or pandemic plan, or as directed by the local or state health departments.   

As an example, for the State of Indiana, Governor Holcomb issued Executive Order 20-13 on March 30, 2020, that, among other things, grants the Indiana State Health Commissioner broad authority “to direct the opening, staffing, equipping and use of temporary facilities for patient care.” Indiana Executive Order 20-13 also suspends the application of several state health laws for any temporary facility authorized by the state health commissioner. 

Next, non-hospital providers should determine if the emergency/disaster plans of any nearby hospital or health system call for access to other types of health facilities in this manner. If so, the provider participants should consider entering into an appropriate written contract with that hospital or health system before engaging in more flexible activities permitted by the federal blanket waivers and corresponding state and local health regulatory measures.

Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.

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¹ In terms of legal authority for these measures, CMS has stated, “In certain circumstances, the Secretary of the Department of Health and Human Services (HHS) using section 1135 of the Social Security Act (SSA) can temporarily modify or waive certain Medicare, Medicaid, CHIP, or HIPAA requirements, called 1135 waivers. There are different kinds of 1135 waivers, including Medicare blanket waivers. When there’s an emergency, sections 1135 or 1812(f) of the SSA allow [CMS] to issue blanket waivers to help beneficiaries access care. When a blanket waiver is issued, providers don’t have to apply for an individual 1135 waiver. When there’s an emergency, [CMS] can also offer health care providers other flexibilities to make sure Americans continue to have access to the health care they need.” (Emphasis added.)

² 42 CFR §482.41 and §485.623.

³ 42 CFR §413.65.

⁴ Under 42 CFR § 483.90.

⁵ Under 42 CFR 483.90.