Federal Judge Overturns CMS Rule to Cut Medicare Payments to Outpatient Hospital Clinics

September 2019 ~

A U.S. District Judge has overturned a CMS site-neutral payment policy that had reduced Medicare reimbursement rates for off-campus hospital clinic visits.

The rule, initiated in January by the White House administration under existing site-neutral pay policy, was an attempt to pay the same rate to hospitals as to independent physicians. Prior to its implementation, Medicare reimbursed services provided at a hospital outpatient facility at a higher rate than the same services delivered in a traditional doctor’s office.

In her ruling, the judge found that the rule didn’t qualify as a method for controlling unnecessary spikes in hospital use and that the administration had exceeded its authority when it expanded the site-neutral pay policy to evaluation and management services at off-campus hospital clinics.

Judge Collyer wrote the law “does not make it clear what a ‘method’ is, but it does make clear what a ‘method’ is not: it is not a price-setting tool, and the government’s effort to wield it in such a manner is manifestly inconsistent with the statutory scheme.” Adding that the government can’t “shoehorn a ‘method’ into the multi-faceted congressional payment scheme when Congress’ clear directions lack any such reference.”

“CMS believes it is paying millions of taxpayer dollars for patient services in hospital outpatient departments that could be provided at less expense in physician offices,” she wrote in her decision. “CMS may be correct. But CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payments only for certain services performed by certain providers.”

The American Hospital Association (AHA) and the Association of American Medical Colleges (AAMC), applauded the judge’s decision. “The ruling, which will allow hospitals to maintain access to important services for patients and communities, affirmed that the cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care,” The groups said in a joint statement.

The decision is a victory for hospitals, who last year after the final rule’s release, filed a lawsuit claiming that the expanded site-neutral payment policy would result in reduced reimbursement rates to hospitals by a total of $380 million in 2019 and $760 million in 2020.

Since the expanded site-neutral payment policy was enacted on January 1, hospitals have already lost Medicare reimbursement this year for clinic visits. In the lawsuit, AHA and AAMC called on the court to have CMS to refund hospitals for these financial losses.

The judge did not order the CMS to pay hospitals what the agency had withheld under the proposed rule, as the hospital plaintiffs had asked. Instead, she asked for a joint status report from the hospitals and agency so she can evaluate whether she needs additional briefing to decide on a remedy, due by October 1.

Source(s): Modern Healthcare; RevCycleIntelligence; MedScape; HealthcareDIVE; Fierce Healthcare;