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December 17, 2019

Hospitals wanted to block 2020 site-neutral payment cuts. A judge just said no.

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    A federal judge on Monday rejected a request from the American Hospital Association (AHA) and others to block site-neutral payment cuts to off-campus hospital facilities, which are scheduled to take effect Jan. 1, 2020.

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    Background: CMS says it will implement 2020 site-neutral payment cuts

    Previously, CMS generally has paid more for clinic visits conducted in off-campus hospital outpatient departments (HOPD) than those conducted in the physician-office setting. However, the agency in 2019 began to shift payments for services provided at HOPDs to match those for clinical visits that it pays under Medicare's Physician Fee Schedule.

    CMS had planned to implement the site-neutral payment policy over a two-year period by:

    • Reducing the payments for routine clinical visits to off-campus HOPDs by 30% in CY 2019 compared with CY 2018, bringing Medicare payments down to $81 for such visits and beneficiary copays down to $16; and
    • Reducing the payments by 60% in CY 2020 compared with CY 2018, bringing Medicare payments down to $46 for such visits and beneficiary copays down to $9.

    CMS estimated the change would save Medicare about $380 million in 2019 and $760 million in 2020.

    However, the payment reduction policy faced lawsuits from the AHA, the Association of American Medical Colleges (AAMC), three independent health systems, and more than 30 hospitals. The plaintiffs sought to block the Trump administration from implementing the site-neutral payment policy, claiming the final rule exceeds CMS' statutory authority and violates Congress' intent.

    The administration, meanwhile, has argued that CMS had the authority to implement the payment cuts as a method for controlling unnecessary increases in hospital use.

    But U.S. District Judge Rosemary Collyer in September overturned the policy, saying the administration had overstepped its authority by finalizing the policy. Collyer did not order CMS to pay the hospitals the amounts withheld from them under the final rule, but she asked hospitals and CMS to develop a joint status report by Oct. 1 to help her determine whether she needed further briefings to decide what remedies are needed in the case.

    CMS in a court filing issued in October asked Collyer to issue a 60-day stay of her ruling, but Collyer denied the agency's request. In light of Collyer's ruling, CMS in a bulletin issued last week said it plans to reimburse hospitals for the 2019 site-neutral payment cuts.

    But HHS last week also filed a notice to appeal Collyer's ruling to the U.S. Court of Appeals for the District of Columbia Circuit. Further, an HHS spokesperson said CMS still plans to move forward with site-neutral payment cuts the agency included in Medicare's HOPPS rule for CY 2020.

    Hospitals have estimated that the 2020 cuts could cause them to lose $760 million. AHA, AAMC, and others recently asked a federal court to block the site-neutral policy for 2020, arguing the cuts are illegal under Collyer's ruling because the payment cuts for 2020 stem from the 2019 rule.

    CMS has argued that Collyer's ruling applies to only to 2019.

    Federal judge denies request to block site-neutral payment cuts for 2020

    Collyer on Monday denied the request from AHA, AAMC, and others to block the site-neutral payment cuts for CY 2020, saying her earlier ruling applies only to the site-neutral payment policy for 2019. "As a technical matter, the government correctly argues that the court's previous order was limited only to the 2019 [f]inal [r]ule," Collyer wrote in her ruling.

    In addition, Collyer wrote that the court currently does not have jurisdiction over the site-neutral payment policy for 2020. She explained that, in order for hospitals to file suit against the 2020 payment cuts, they will have to wait until they are harmed by the policy, meaning that CMS has paid a claim with the reduced rates for 2020.

    However, Collyer also wrote that "CMS clearly disregarded the substance of the court's [earlier] decision … when it relied on the same … reasoning to justify its 2020 reimbursement rates," and she accused CMS of acting "above the law" by moving forward with the site-neutral payment cuts for next year.


    A CMS spokesperson said the agency is pleased with Collyer's decision and noted that it is appealing her earlier decision striking down the 2019 site-neutral payment cuts.

    AHA in a statement said it "and other plaintiffs" involved in the lawsuit "remain confident that the courts will find the 2020 cuts to be illegal, just as they found the 2019 cuts."

    Melinda Hatton, AHA's general counsel, said AHA was encouraged by Collyer's finding that CMS is acting in a manner that "appears to be 'above the law' by instituting the 2020 cuts" (King, FierceHealthcare, 12/16; Cohrs/Brady, Modern Healthcare, 12/16; Stein, Inside Health Policy, 12/16 [subscription required]).

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