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December 5, 2018

Hospitals are suing to block Medicare’s site-neutral payments

Daily Briefing

    The American Hospital Association (AHA), the Association of American Medical College (AAMC), and three independent health systems on Tuesday filed a lawsuit seeking to block the Trump administration from implementing site-neutral payments under Medicare.

    Cheat sheet: What is HOPPS? How does CMS calculate reimbursement for outpatient services?

    Background: CMS finalizes site-neutral payment policy

    The final rule contains several policy updates intended to address payment differences between different sites of service. Currently, CMS generally pays more for clinic visits conducted in the hospital outpatient (HOPD) setting than those conducted in the physician office setting. In CY 2018, CMS paid off-campus HOPDs $116 for routine clinic visits, with Medicare beneficiaries paying $23 copayments for such services.

    However, under CMS' Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Payment System final rule for calendar year (CY) 2019, the agency will begin paying off-campus hospital outpatient departments (HOPD) the same amount for clinical visits that it pays under Medicare's Physician Fee Schedule. CMS will implement the payment reduction 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 predicted that the change will save Medicare an estimated $380 million in 2019.

    Providers sue CMS

    AHA, AAMC, Maine-based York Hospital, Michigan-based Mercy Health Muskegon, and Washington-based Clallam County Public Hospital in the lawsuit filed Tuesday claim the site-neutral payment policy exceeds CMS' statutory authority and violates Congress' intent. The lawsuit, filed in the U.S. District Court for the District of Columbia, states, "CMS may not contravene clear congressional mandates merely because the agency wishes to make cuts to Medicare spending."

    The lawsuit also argues that the policy would result in "serious reductions to Medicare payment rates" and could cause hospitals to eliminate services, which would restrict health care access for patients with complex needs.


    AHA President and CEO Rick Pollack in a statement said, "These cuts directly undercut the clear intent of Congress to protect [HOPDs] because of the real and crucial differences between them and other sites of care." He continued, "Patients who receive care in a [HOPD] are more likely to be poorer and have more severe chronic conditions than patients treated in an independent physician office. In addition, only hospitals provide 24/7 access to care for patients, regardless of their ability to pay, hospitals are held to far higher regulatory requirements, and hospital outpatient departments in inner cities and rural areas are often the only sites of care that provide the services they do."

    Separately, HHS Secretary Alex Azar in a speech at the American Enterprise Institute on Tuesday said the administration intends to move forward with implementing site-neutral payments. "Fixing this perverse situation has been talked about for years, by administrations of both parties—and yet this administration is the one finally bold enough to do it," he said (Baker, "Vitals," Axios, 12/5; Luthi, Modern Healthcare, 12/4; Reed, FierceHealthcare, 12/4; Diamond, "Pulse," Politico, 12/5).

    Overwhelmed by 2,000+ pages of Medicare payment rules? Here's what you need to know.

    If you missed our recent webconference series diving deep into CMS' proposed and final rules for some of Medicare's most important, and often confusing, programs, don't worry—we've got you covered.

    Download our one-page cheat sheets for a quick overview of each rule's scope, then review the slide decks from our webconferences for full details:

    Access the Resources

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