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January 24, 2019

38 hospitals are suing the Trump administration over site-neutral payments

Daily Briefing

    Nearly 40 hospitals on Friday filed a lawsuit against HHS claiming that HHS Secretary Alex Azar overstepped his authority when he finalized a site-neutral payment policy that cuts Medicare payment rates for off-campus hospital facilities.

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

    Background: CMS finalizes site-neutral payment policy

    The final rule, which took effect Jan. 1, contains several policy updates intended to address payment differences between different sites of service. Before the final rule took effect, CMS generally paid more for clinic visits conducted in the hospital outpatient (HOPD) setting than those conducted in the physician office setting.

    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 pay off-campus hospital outpatient departments (HOPD) the same amount for clinical visits that it pays under Medicare's Physician Fee Schedule. CMS is implementing 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 has predicted the change will save Medicare an estimated $380 million in 2019.

    Hospitals, health systems file lawsuits to block final rule

    The American Hospital Association (AHA), the Association of American Medical College (AAMC), and three independent health systems in December 2018 filed a lawsuit seeking 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 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.

    Last week, 38 hospitals—including Montefiore Health System, Atrium Health, the University of Virginia Medical Center, and Vanderbilt University Medical Center—filed a separate lawsuit in the U.S. District Court for the District of Columbia that similarly claims Azar overstepped his authority when he finalized the new policy, and that the move conflicted with Congress' intent.

    The new lawsuit centers on Section 603 of the Bipartisan Budget Act of 2015, which exempted off-campus hospital departments from site-neutral payment policies. The hospitals in the lawsuit alleged that the final rule is "irrational … and a blatant attempt to circumvent the will of Congress clearly expressed in Section 603."

    The hospitals also argue that services provided in HOPD settings cost more than those provided in physicians' offices, because hospitals have to meet stricter regulatory requirements and offer more services than physician offices. However, they claim, "None of these conditions for participating in Medicare and other federal health care programs apply to an independent physician's office," meaning the rule ultimately puts HOPD settings at a disadvantage. The payment cuts will worsen the "significant financial strain" the hospitals already faced before the final rule took effect as a result of "steadily increasing costs in the health care marketplace and reimbursement cuts from the government and private insurers alike," the lawsuit stated.

    What's next?

    According to Modern Healthcare, the new lawsuit could be combined with the suit filed by AHA, AAMC, and three independent health systems.

    An HHS spokesperson did not respond to Modern Healthcare's request for comment on the lawsuit (Ellison, Becker's Hospital Review, 1/23; Bannow, Modern Healthcare, 1/22).

    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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