Hospitals can share space, services under final CMS guidance

Maya Goldman, November 15, 2021

A hospital can be located on the same property or even in the same building as another hospital, so long as each entity can independently comply with Medicare and Medicaid program participation requirements, according to guidance the Centers for Medicare and Medicaid Services published Friday.

The policy document provides answers to questions hospitals have asked for years and grants them more leeway than they had under previous federal guidance. The policy also applies to housekeeping, security, laboratories and other services at co-located facilities.

"It offers a lot of clarification, and it does it in a way that I think will allow our members to be really flexible in their approach here, so long as they can meet all the compliance requirements," said Mark Howell, the American Hospital Association's senior associate director for hospital standards and drug policy

Hospitals need to consider if spaces used by another hospital located on their premises could jeopardize their Medicare and Medicaid certifications, CMS wrote in the guidance.

Surveyors examining a hospital that shares a campus or property with another hospital need to identify mutual spaces, the guidance says. A hospital under review will be cited for failure to comply with program requirements in shared spaces, but these incidents could also lead to complaints directed toward the co-located hospital.

"Surveyors are not expected to be evaluating spaces for co-location, but rather determining if the hospital being surveyed is in compliance with the hospital conditions of participation, independent of its co-located provider," the guidance says.

The final guidance is less prescriptive than a draft guidance issued in May 2019. CMS produced that earlier version in response to requests from the AHA and others that the agency be clearer about its expectations for sharing space, services and staff between hospitals. The previous lack of explicit federal advice led some hospitals to end sharing arrangements, which raised concerns about access to care, the AHA wrote CMS in 2017.

The 2019 draft guidance was still more permissive than previous CMS co-location policies but nevertheless instructed hospitals to have "defined and distinct spaces" under their control. Clinical spaces had to be separate, while public spaces and pathways could be shared among separate entities. The draft also included additional requirements for surveys and for sharing staff, which are not included in the final guidance.

Hospitals that share space, equipment, staff or other resources with other facilities at the same site must be prepared to meet Medicare and Medicaid participation requirements, said Lawrence Vernaglia, a partner at Foley & Lardner.

"They're now saying co-location isn't going to be a problem, so long as the certified providers independently manage their requirements under their conditions of participation, which always sounded reasonable to me," Vernaglia said.

CMS should be lenient in its enforcement given that the policy remains a work in progress, Vernaglia said.

The guidance leaves key questions unanswered, Vernaglia said. CMS hasn't spelled out whether the guidance applies to physician practices co-located with hospitals, for example. The policy is unclear about how the agency will distinguish between clinical and non-clinical spaces in co-located hospitals. And CMS needs to offer more information about how critical access hospitals can partner with doctors' officers.