- Tuesday, a federal court found HHS exceeded its statutory authority when it reduced payments for hospital outpatient services delivered outside of hospitals in outpatient provider-based settings, handing hospitals a major win. Before the implementation of CMS' site neutral rule, Medicare reimbursed services provided at a hospital outpatient facility at a higher rate than the same services delivered in a traditional doctor's office.
- The ruling means HHS will have to create remedies to offset the cuts implemented in its final Outpatient Prospective Payment System (OPPS) rule for 2019. Judge Rosemary Collyer of the U.S. District Court for the District of Columbia ordered the parties to file a joint status report by Oct. 1 to determine if additional briefing on remedies is needed.
- The district court judge's opinion may not be the final word on the payment rule, however, because CMS could choose to appeal the ruling. CMS did not respond to a request for comment by time of publication.
At the core of the debate between the hospitals and HHS are cuts to Medicare spending and how much providers in different settings are paid.
CMS estimated the site neutral policy, which equalized payments for office visits regardless of whether they're delivered in a hospital-owned outpatient or a traditional doctor's office, would save Medicare $380 million in 2019.
But the American Hospital Association and the Association of American Medical Colleges (AAMC) sued HHS over those cuts late last year, claiming the changes fell outside of the agency's statutory authority. The groups also said the rule contravened clear Congressional intent to protect hospital outpatient departments due to the many real and crucial differences between them and other sites of care.
The groups warned the payment cuts would disproportionately affect patients with the most complex needs and in the most vulnerable communities. Judge Collyer came down on the side of the challengers.
"CMS believes its paying millions of taxpayer dollars for patient services in hospital outpatient departments that could be provided at less expense at physician offices," she wrote. "CMS may be correct. But CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payment rates only for certain services provided by certain providers."
In a joint statement on the decision, the AHA and the AAMC said Collyer's ruling "will allow hospitals to maintain access to important services for patients and communities."
But the court refused the groups' request seeking to force CMS to issue payments that were withheld due to the final rule. Instead, the court sent the matter back to HHS to fashion an appropriate remedy for the withheld payments related to the OPPS adjustments.
Physician groups, many of which continue to be absorbed by large health systems, generally support site neutrality. A 2015 JAMA study found payments for office visits in a hospital-owned setting were $68 higher than for those at stand-alone offices.
The ruling is "troubling from two standpoints," Shawn Martin, senior vice president for advocacy, practice advancement and policy at the American Association of Family Physicians, told Healthcare Dive.
"One, the ruling suggests the profits of hospitals and health systems are more important than accessible and affordable care for individuals," Martin said. "Second, when we think about challenges to our healthcare system writ large, this is an easy, supportable policy. If we can't do this, this really projects a heavy lift to ever reduce healthcare costs."
Martin said the ruling underscores the need for Congress to act and codify the site neutral policy into law.