Healthcare News
Articles, Jobs and Consultants for the Healthcare Professional
Ryan Thurber, Attorney, Polsinelli Sara Iams, Attorney, Polsinelli

CMS Draft Guidance Offers a New Approach to Hospital Co-Location

By Ryan Thurber
Attorney, Polsinelli
By Sara Iams
Attorney, Polsinelli

See all this Month's Articles

Original Publish Date: October 8, 2019

Earlier this year, the Centers for Medicare and Medicaid Services (CMS) released draft guidance governing co-location between hospitals and other provider types, including the extent to which hospitals can share space, staff, and services with co-located entities. This long-anticipated guidance is not final, but was generally well-received by providers and much of it will likely be finalized as proposed. Consequently, while we await final publication (CMS has not offered a date), hospitals should consider this guidance when evaluating Medicare compliance for existing co-located sites and new locations.


For almost a decade, CMS interpreted Medicare rules to prohibit hospitals from sharing almost any space with another hospital or provider—severely restricting space or service sharing between providers. This interpretation, drawn from a combination of the Medicare hospital conditions of participation (COPs) and CMS provider-based regulations, led to survey citations and denials of provider-based status based on shared hallways, reception desks, waiting rooms, and similar allegations. As a result, hospitals were forced to incur significant build-out costs to fully separate space and to adopt otherwise inefficient approaches to patient care.

Scope of New Draft Guidance

The draft guidance revises Appendix A of the State Operations Manual, which interprets the hospital COPs, and directly applies to hospitals co-located with other hospitals or “health care entities.” Though CMS does not define “health care entity,” it is broadly described and will likely be read by CMS to include entities that are surveyed independently (e.g., IDTFs, ASCs) as well as non-surveyed entities (e.g., physician offices).

What Is Addressed?

The intent of the CMS draft guidance is to provide flexibility to hospitals and other providers without compromising patient safety, quality, or privacy. The guidance covers space and staff sharing, contracted services, emergency services, and specific guidance for state survey teams. The following are a few of the key areas addressed:

Space Sharing

Under the draft guidance, a hospital must have distinct clinical spaces over which it maintains control at all times. This includes any area designated for patient care, (e.g., exam rooms, nursing units, laboratories, imaging centers, operating rooms, etc.). CMS states that co-mingling patients in clinical spaces could pose risks for infection control, patient safety, patient privacy, and confidentiality of medical records.

In a major departure from its prior interpretation, CMS now suggests that hospitals and co-located health care entities may share non-clinical spaces, including:

The guidance requires that public paths of travel (e.g., hallways, walkways, etc.) be well-marked so guests understand where space is shared or divided between providers.

Staff Sharing

Hospitals must independently meet COP staffing requirements and cannot, for example, furnish compliant nursing coverage if nursing staff are not fully dedicated to the hospital for a specified shift. Essentially, clinical staff may not work at one hospital while on-call for another provider, float between a hospital and another entity, or otherwise furnish simultaneous services to two entities. This guidance would not apply to physicians on the medical staff of two or more hospitals.

Contracted Services

CMS clarified that hospitals may obtain services under arrangements from a co-located hospital or health care entity, and need not notify patients that such services are obtained under contract. CMS considers these services to be provided under the oversight of the hospital’s governing body, and are treated as any other service provider directly by the hospital.

Emergency Services

CMS devotes substantial space to emergency services requirements for a hospital co-located with another hospital or healthcare entity that does not have its own emergency department. CMS wants to ensure these hospitals have the independent capability, and corresponding policies, to appraise and perform initial care in an emergency rather than relying on a co-located health care entity to respond. This guidance does not change a hospital’s EMTALA obligations.

Survey Guidance

Finally, the guidance directs surveyors to obtain floor plans to determine how co-located space is used, and by whom, as well as a list of all services a hospital obtains through contracts with others, including the hospital or other health care entity with which it is co-located.


As noted above, hospitals should view this guidance as a harbinger of CMS’ new co-location interpretation and, in evaluating co-located sites, may want to consider:

For more guidance on the implications of the CMS draft policy and advice on how to prepare, providers should seek the advice of their legal counsel.

About the authors:

Sara Iams is a health care attorney with Polsinelli who focuses on the regulatory, compliance and operational issues facing health care providers, including hospitals, physician clinics, clinical laboratories, and dialysis facilities. She counsels clients on payment matters, including prospective strategies to enhance reimbursement opportunities and retrospective analysis and resolution of potential overpayments. Contact Sara at or 202.626.8361.

Ryan Thurber is a health care attorney with Polsinelli who counsels a variety of provider types on complex regulatory compliance and operational issues. His practice focuses on Medicare and Medicaid reimbursement and enrollment issues, third party investigations, and physician contracting. Contact Ryan at or 303.583.8252.