What you need to know about the forces reshaping our industry.


January 15, 2020

Hospitals just sued (again) to block 2020 site-neutral payment cuts

Daily Briefing

    The American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), and several hospitals on Monday sued HHS over the 2020 site-neutral payment cuts after a judge late last year rejected a similar lawsuit, saying the request was premature.

    Slide deck: Examine the details of the HOPPS final rule


    The suit centers around payment cuts to off-campus hospital outpatient departments (HOPDs) that CMS began implementing in 2019. Prior to the cuts, CMS generally paid more for clinic visits conducted in off-campus HOPDs 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, AAMC, three independent health systems, and more than 30 hospitals.

    In September 2019, U.S. District Judge Rosemary Collyer overturned the policy for 2019, saying the administration had overstepped its authority by finalizing the cuts. Collyer did not order CMS to pay the hospitals the amounts withheld from them under the final rule, but CMS in a bulletin issued in December said it planned to reimburse hospitals for the 2019 payment cuts.

    However, that same month HHS 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 planned still to move forward with site-neutral payment cuts for CY 2020.

    Hospitals estimated that the 2020 cuts could cause them to lose $760 million.

    AHA, AAMC, and others last year asked Collyer to also block the looming 2020 cuts site-neutral policy for 2020, but Collyer denied the request. She explained that, in order for hospitals to file suit against the 2020 payment cuts, they would 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.

    Hospitals and hospital organizations sue HHS to block 2020 site-neutral payment cuts

    AMA, AAMC, and several hospitals on Monday filed a new lawsuit against HHS claiming the 2020 site-neutral payment cuts are unlawful.

    The hospitals in the lawsuit said the rule is "flagrantly inconsistent with the Medicare statute," adding that it "is no less an impermissible flex of regulatory authority than the 2019 final rule, and should meet the same fate."

    The hospitals in the lawsuit said payment cuts for covered hospital outpatient services that target specific services have to be budget-neutral. The 2020 site-neutral payment cuts, the hospitals claim, make "non-budget-neutral payment adjustments," meaning some hospitals "may have to make difficult decisions about whether to reduce services in response to the lowered payment rate."

    FierceHealthcare said CMS did not respond to its request for comment (Ellison, Becker's Hospital Review, 1/13; King, FierceHealthcare, 1/13; Reuter, MedCity News, 1/2020; AHA release, 1/13).

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.