CMS on Thursday announced plans to reimburse hospitals for site-neutral payment cuts the agency made to off-campus hospital facilities in 2019—but CMS separately said it still intends to implement site-neutral payment cuts in 2020.
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, the agency in 2019 began 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 but similar lawsuit in the U.S. District Court for the District of Columbia. 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 in September sided with hospitals and overturned the final rule, 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.
HHS on Thursday filed a notice to appeal Collyer's ruling to the U.S. Court of Appeals for the District of Columbia Circuit.
CMS plans to reimburse hospitals for 2019 cuts
However, in light of Collyer's ruling, CMS in the bulletin issued Thursday said it plans to reimburse hospitals for the 2019 site-neutral payment cuts.
The agency said it has updated its 2019 payment rates for clinic visits at certain off-campus hospital facilities to eliminate the payment cuts. CMS explained that it "installed a revised Hospital Outpatient Prospective Payment System Pricer to update the rates being applied to claim lines." CMS said, "The revised Pricer went into production on November 4, 2019, and applies to claims with a line item date of service of January 1, 2019, and after. Starting January 1, 2020, and over the next few months, the Medicare Administrative Contactors will automatically reprocess claims paid at the reduced rate; no provider action needed."
CMS told Inside Health Policy the agency began paying hospitals at the higher rates as of Nov. 4.
CMS says it will implement site-neutral cuts in 2020
However, an HHS spokesperson told Inside Health Policy that CMS still plans to move forward with the site-neutral payment cuts included in Medicare's HOPPS rule for CY 2020.
Hospitals estimate 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.
But CMS has argued that Collyer's ruling applies to only to 2019 (Brady, "Transformation Hub," Modern Healthcare, 12/12; Owens, "Vitals," Axios, 12/13; Stein, Inside Health Policy, 12/11 [subscription required]; Stein, Inside Health Policy, 12/12 [subscription required]).