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When the local hospital approaches you about selling your practice and converting it to a provider-based outpatient department, you may want to hear them out. There are many benefits to becoming a department of the hospital, but what would it mean for you and the practice you worked tirelessly to build?

What Does It Mean to Be "Provider Based"?

A provider-based facility is a department of the hospital and provides healthcare services under the name, ownership, administrative and financial control of the hospital. Clinical services are billed under the hospital’s provider number. The department comprises the physical facility and the personnel and equipment needed to deliver the healthcare services.

When a physician practice is converted to a provider-based department of a hospital, the hospital can bill Medicare for the technical component of the services provided, which is reimbursed at a much higher rate than if billed by an independent physician practice. The reason for the difference is that when a hospital is reimbursed for the technical component, the payment includes the additional overhead and expenses associated with operating a hospital (e.g., administrative costs, maintenance expenses and the cost of housekeeping).

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