The Centers for Medicare and Medicaid Services (CMS) released draft guidance on May 3 regarding hospitals co-locating with other hospitals and with nonhospital health care entities. Though the term is largely self-explanatory, co-location involves the shared use of personnel, equipment and services by two separate health care entities located in the same space. Co-location can involve a level of integration that shortens not only the physical distance between entities, but the organizational and logistical distance between their operations. Many argue that this can increase access to care by, among other things, increasing convenience for the patients and simplifying coordination between the co-located health care entities.

In its statement accompanying the draft guidance, CMS stated that it appreciates its role in overseeing the quality of hospital care in the United States, but it also recognizes that overly strict rules regarding co-location (which is how many see CMS's previous positions on co-location) result in a lack of flexibility. The draft guidance, therefore, aims to strike a balance between protecting the safety and quality of care for patients and allowing flexibility in the partnerships between hospitals co-located with other hospitals and healthcare entities.

Many in the health care industry welcome the draft guidance. For example, in September 2017, the American Hospital Association wrote a letter to CMS to note that hospitals were shying away from potential (or getting rid of existing) co-location arrangements for fear that such arrangements would result in noncompliance with CMS rules, including the conditions of participation (CoPs). This fear, claimed the letter, arose from a lack of co-location guidance and its consequences harmed patients.

Health care organizations must satisfy CMS's CoPs to participate in the Medicare and Medicaid programs. CoPs permit co-location insofar as health care organizations may share certain common areas on the same campus or building. However, co-located hospitals must each demonstrate separate and independent compliance with the applicable CoPs. The draft guidance gives a road map for how an organization may organize shared spaces, services (including emergency services) and personnel in such a way to independently comply with CoPs. It also explains how shared staff may be governed in a compliant contractual arrangement wherein authority and accountability are clearly delineated. CMS surveyors review co-location arrangements in connection with confirming compliance with CoPs. The draft guidance specifies what the surveyors will look at so that the surveyed entities can adequately prepare for compliance.

Shared Space

The draft guidance permits joint use of public areas such as lobbies, reception areas and waiting rooms on the same campus. However, due to concerns about infection control, patient management, privacy and other issues related to quality and safety, the draft guidance does limit the shared use of clinical spaces. By way of example, co-mingling a nursing unit could jeopardize patient safety because the two entities in question may have different infection control plans. Further, the guidance generally prohibits the travel between shared spaces via clinical areas because such travel could jeopardize patient privacy. It is therefore important for co-located health care entities to follow the draft guidance regarding the difference between a public and private path of travel.

Contracted Services

While a hospital may contract with a co-located hospital or health care entity for certain services, that hospital is ultimately responsible for ensuring that all of its services are provided in compliance with the hospital CoPs. The draft guidance provides numerous examples of typical contracted services including laboratory, dietary, pharmacy, maintenance, housekeeping and security services, along with food preparation and delivery services. Given the shared space, it is also common to see contractually shared utilities such as fire detection and suppression, medical gases, suction, compressed air and alarm systems. With the foregoing examples, and any others, the hospital contracting for the services may use the guidance, once it is finalized, to ensure compliance.

Staffing Contracts

As is the case with service contracts, co-located hospitals are each required to individually comply with CoPs in the context of staffing and personnel contracts. Critically, staff contracted by a co-located health care entity from another co-located health care entity may not “float.” That is, during each shift the staff member in question must be working for only one of the co-located entities. For example, a staff member may not be providing services for one entity while on call for another entity and may not provide services simultaneously. The guidance also points to outside standards to ensure, for example, that entities contracting for staff have the necessary number of staff on duty to satisfy patient care requirements and that such staff possess all necessary education, training and licenses.

Clinical Services Contracts

Under the draft guidance, co-located hospitals and health care entities may contract with one another for clinical services. Importantly, the draft guidance provides that the hospital contracting for such services need not necessarily provide its patients with notice that certain clinical services are provided by contract through a co-located hospital or other health care entity if such services, “are provided under the oversight of the hospital's governing body and would be treated as any other service provided directly by the hospital.”

Emergency Services

Generally, CMS's guidance regarding emergency services in the context of co-location consists of the following: “Hospitals without emergency departments must have appropriate policies and procedures in place for addressing individuals' emergency care needs 24 hours per day and seven days per week.” The draft guidance expands on this with requirements for what those policies and procedures must include. In addition, it provides requirements tailored to a hospital's patient population and addresses circumstances including patient transfer and hospitals without emergency departments.

Though perhaps later than many wanted, CMS's draft guidance appears to have been met with largely positive reactions throughout much of the health care industry. Comments are open to all stakeholders for a period of 60 days, ending on July 2. If you or your clients wish to share a position on the draft guidance, it is important to leave the comment before the deadline. After the 60-day comment period, CMS will finalize the guidance.

—Andrew Stein, an associate at Lamb McErlane who focuses on health and business law, assisted with preparing this article.

Vasilios J. Kalogredis is chairman of Lamb McErlane's health law department. He represents many medical and dental groups and thousands of individual physicians and dentists.