October 23, 2019

A federal judge on Monday denied CMS' request to modify and stay a prior ruling that struck down cuts to Medicare payment rates for off-campus hospital facilities.

Nov. 13 webinar: Get a detailed analysis of the looming 2020 HOPPS final rule

Background: Federal judge strikes down Medicare's site-neutral payment rule

HHS' site-neutral payment 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 outlined its plan to shift payments for services provided at off-campus hospital outpatient departments (HOPD) to match those for clinical visits that it pays under Medicare's Physician Fee Schedule. CMS was 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 estimated the change would save Medicare about $380 million in 2019 and $760 million in 2020.

However, the American Hospital Association (AHA), the Association of American Medical Colleges (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 argued 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.

In January, 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 claimed HHS Secretary Alex Azar overstepped his authority when he finalized the new policy, and that the move conflicted with Congress' intent. The 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 argued 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.

The plaintiffs ultimately consolidated the two lawsuits into one suit.

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 last month sided with hospitals and overturned the final rule, saying the administration had overstepped its authority when 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 needs further briefings to decide what remedies are needed in the case.

According to FierceHealthcare, CMS in a court filing earlier this month asked Collyer to issue a 60-day stay of her ruling, arguing that Collyer's ruling was not reasonable because "there remains considerable doubt over the correct legal outcome." The agency added that it would have no simple way to recoup overpayments if it is required to pay HOPDs "at a higher payment rate now and then ultimately prevails [in the case] on any appeal."

In addition, CMS argued that it no longer has a methodology for paying HOPDs because Collyer struck down that methodology when she vacated the HOPD payment portion of the final rule. As such, CMS said Collyer should stay her ruling to allow the agency time to decide whether it should appeal her ruling.

Collyer denies CMS' requests

Collyer disagreed with CMS' arguments and denied the agency's request for a stay. She wrote that CMS still has a methodology to pay HOPDs because the agency had developed underlying OPPS payment rates for such providers, and then added a rate reduction. Therefore, CMS could use the underlying OPPS payment rates to pay HOPDs, she wrote.

Collyer added that judges typically grant stays only when an applicant can demonstrate that it has a strong chance of winning on appeal, would be irreparably harmed, and is protecting public interest, as well as when the ruling also would affect other parties. She wrote, "At most, CMS has only hinted at irreparable harm," and "has completely ignored the other factors. Without more, CMS has not satisfied its burden."

Reaction

Groups and providers involved in the lawsuit praised Collyer's latest ruling.

Melinda Hatton, general counsel for AHA, in a statement said the group "expects CMS to comply with [the latest] order and promptly repay the impacted hospitals to support the work they do for the patients they serve."

CMS said it does not comment on pending lawsuits, FierceHealthcare reports.

According to Axios' "Vitals," CMS in its proposed OPPS rule for CY 2020, which the agency must finalize by Nov. 1, has called for expanding site-neutral payments (King, FierceHealthcare, 10/21; Gooch, Becker's Hospital CFO Report, 10/21; Stein, Inside Health Policy, 10/21 [subscription required]; AHA News, 10/21; Owens, "Vitals," Axios, 10/22).

Nov. 13 webinar: Get a detailed analysis of the looming 2020 HOPPS final rule

Join us on Wednesday, Nov. 13 at 3 p.m. ET where we'll examine the details of the CY 2020 Hospital Outpatient Prospective Payment System (HOPPS) Final Rule, including changes to payment rates, as well as CMS's new price transparency requirements. We'll also cover major developments for ASCs.

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