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Guidance for Hospital Co-location with Other Hospitals or Healthcare Facilities


The Centers for Medicare & Medicaid Services (CMS) recently released the final co-location guidance that hospitals have been anticipating since 2019. This guidance applies to arrangements where hospitals or another Medicare entity is co-located with a different healthcare provider. Such arrangements manifest in hospital-within-a-hospital arrangements or when hospitals lease space, (i.e., to an urgent care center on the hospital campus or to a local physician practice). These arrangements are also common when a hospital maintains provider-based outpatient departments in the same building as another entity. In many cases, these arrangements involve a certain amount of overlap including lobbies, hallways, common space, contracted services like laundry, dietary services, waste disposal, as well as shared staffing. Because hospitals are each independently required to meet each Conditions of Participation (CoP) requirement independently, co-location arrangements raise questions about each hospital’s ability to do so.

There has long been concern that such arrangements, structured improperly, could cause hospitals to fail to meet certain hospital CoPs or defeat a hospital department’s provider-based status. State surveyors historically interpreted and applied these principles sporadically and non-uniformly, leading hospitals to seek more definite guidance. CMS issued such guidance in a QSO memorandum to surveyors, although it is not clear that the guidance provides the requested clarity. In particular, the final guidance removed the examples of compliant and non-compliant arrangements due to concern regarding recent case law developments warning CMS against rule-making actions that do not comply with the Administrative Procedure Act. As a result, the new guidance falls short of its goals and perpetuates the same open-ended interpretation of the CoPs that leaves enforcement discretion up to state surveyors based on their own interpretations of the CoPs.

In a February call, CMS addressed the new guidance, reiterating its position that the hospital CoPs continue to limit co-location arrangements significantly. Notably, the new guidance specifically places the burden on hospitals to demonstrate how their co-location arrangements meet the applicable CoPs. Thus, at the outset of any co-location arrangement, hospitals should carefully consider and document how the arrangement will work and permit compliance with the CoPs.

Final Guidance


The CoPs have numerous requirements that relate in some way or another to a hospital’s physical space. These include various privacy and safety requirements, infection control requirements, and various requirements related to the physical plant or physical environment of a hospital. In the past, these requirements have raised questions such as whether co-located entities may share certain common areas or other areas within a hospital.

The draft co-location guidance released in 2019 included helpful examples,  such as shared lobbies, waiting rooms, reception, public restrooms, elevators, and travel-ways through non-clinical areas. The draft guidance similarly warned against areas including shared hallways through inpatient nursing units or clinical departments or co-mingling patients in the same nursing unit, noting that such co-mingling could affect patient safety because each entity would have a different infection control plan that could not be enforced with such patient-comingling.

Unfortunately, the new guidance no longer includes any of these examples. It simply refers hospitals back to the CoPs that may relate to physical space and directs the hospital to “consider whether the hospital’s spaces that are used by another co-located provider risk their compliance with these requirements.”

Contracted Services

The CoPs require hospitals to provide various services such as laboratory services, dietary services, pharmacy, and housekeeping. The new guidance indicates that these services may be provided either directly or by contract, therefore a co-located entity may also obtain these services either directly or by contract. As such, a co-located entity may contract, or subcontract, with the “host” hospital for services like maintenance or housekeeping. Any such contract should give the governing body of the entity receiving the service some ability to “oversee” the service, and thus complete deference to the primary entity would not be permissible.


The CoPs require certain levels of staffing, including nursing staffing. Like contracted services, staffing may be obtained directly or by contract. Therefore, a co-located entity also may contract or subcontract for staffing. Any such contract must ensure that each entity meets relevant staffing requirements independently. This may require each entity to provide separate training on the entity’s policies and procedures to the same group of nurses if the nurses will be providing services to both entities. Likewise, the nurses would have to be contractually obligated to each entity for oversight and education.

Interestingly, the new guidance drastically reduces limitations on floating staff that were present in the 2019 draft guidance. However, it is not clear whether this was intended to signal that floating staff is acceptable, or instead removed from the guidance due to the limitations on what CMS can and cannot say prior to rulemaking. While some commentators have viewed this change as a carte blanche to “float” employees, we recommend a more careful approach. The draft guidance explicitly prohibited the ability of staff to “float” between, or be on duty, at both entities at once. This applied to all staff including patient-facing staff like nurses but also to staff such as lab personnel and pharmacists, prohibiting such staff from working on behalf of both entities simultaneously. The final guidance does not include this limitation. Therefore, there could to be more flexibility for hospitals and co-located entities to share staff like pharmacists and lab personnel without needing to duplicate staff. On the other hand, the CoPs continue to require that hospitals be able to meet their patient’s safety needs, which may be difficult to ensure through floating nurse staff or other clinical staff. In all events, hospitals and co-located entities should evaluate and ensure that they are each, at all times, able to meet patient safety needs and would be able to demonstrate the same to a surveyor.

The main takeaway from the final guidance, in many ways, is that we are back where we started. Without examples of compliant and non-compliant relationships, the guidance remains as it was prior to the draft 2019 guidance, that hospitals must at all times be in compliance with the CoPs and co-location arrangements must not affect that. This reinforces the need for hospitals to carefully consider such arrangements and document compliance with the CoPs.

The 2019 Guidance for Hospital Co-location with Other Hospitals or Healthcare Facilities and the revised 2021 version, may be found here:

If you have any questions about this legal update or to receive additional information, please contact Robert Threlkeld or Elliott Coward, or one of MMM’s Healthcare attorneys.