Appeals Court Sides with Federal Government on Site-Neutral Payment Cuts

July 23, 2020

The U.S. Court of Appeals for the District of Columbia Circuit on July 17 sided with the Department of Health and Human Services in a lawsuit challenging the authority of the government to decrease payments to off-campus hospital outpatient departments. This reversed a district court decision from 2019 that had previously ruled the department’s actions unlawful.
At issue has been the department’s so-called “site-neutral” payment policy, which reduced hospital payments for clinic visit services delivered at off-campus hospital outpatient departments (HOPDs). In the 2015 Bipartisan Budget Act, Congress reduced payments for new HOPDs to put them in line with non-hospital sites paid under the physician fee schedule. At the same time, Congress grandfathered existing HOPDs at the previous, higher rate. Nevertheless, in the 2019 OPPS rule, CMS alleged that a statute allowing the agency to reduce unnecessary utilization of services also grants it the authority to reduce payments to off-campus HOPDs for clinic visit services.
The prior decision from the district court had ruled that CMS could not use its unnecessary utilization of services authority in a manner that conflicts with the statute Congress passed directing how payments must be made under the outpatient rule. The Court of Appeals decision, however, cited a previous court case from 1984 that gave the federal government wide deference on judicial review of its Medicare statute.
WHA has made this topic a priority advocacy issue, enlisting support from members of Wisconsin’s congressional delegation in a 2018 letter to CMS expressing concern over the policy. WHA has noted that the policy fails to take into account the fact that hospitals have historically been paid at higher rates in order to offset the higher costs they face for running 24/7 emergency departments, facing a higher regulatory standard and generally treating sicker, more medically-complex patients. The impact of the original rule proposed by CMS in 2018 was projected to cost Wisconsin hospitals and health systems approximately $440 million over 10 years.
The American Hospital Association and plaintiffs noted their disappointment in the decision and stated they would be exploring further appeals options. WHA will also continue its advocacy efforts and examine opportunities for Congress to provide a legislative fix. For more information, contact WHA’s Director of Federal and State Relations, Jon Hoelter.

This story originally appeared in the July 23, 2020 edition of WHA Newsletter