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‘Site-Neutrality’ Policy is Thrown Out by Federal District Court

on Wednesday, 2 October 2019 in Health Law Alert: Erin E. Busch, Editor

On September 17, 2019, US District Judge Rosemary Collyer of the District of Columbia struck down CMS’ policy included in the CY2019 Outpatient Prospective Payment System (OPPS) rule that cut Medicare payment rates to hospitals offering physician services. The policy established payment for medical services provided in off-campus, hospital outpatient departments at the same rate as those services in doctors’ offices. The policy was designed to curb hospital consolidation and lower cost.

Opponents of the policy, including the American Hospital Association, the Association of American Medical Colleges and 38 hospitals, argued successfully to the court that CMS does not have the statutory authority to lower Medicare payment rates. In American Hospital Assn. et al v. Azar, Dist. Ct. D.C., No. 1:18-cv-02841, 9/17/19, Judge Collyer wrote: “CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payments only for certain services performed by certain providers.”

In the ruling, the Judge did not order CMS to pay hospitals the amounts that were withheld under the new payment policy, instead ordering the parties to provide additional briefing by October 1, 2019, regarding what remedies are necessary. This leaves open the question as to what hospitals need to do to preserve appeal rights for CY2019 payments. Without that direction, providers are generally advised to appeal 2019 payments, recognizing however that future remedies may only be offered to those hospitals that had previously appealed the payments either administratively or through the federal court.

It’s unlikely we’ve seen the last of CMS’s efforts on this front. First, an appeal by CMS is likely. Additionally, with Congress generally supportive of the cost reduction, most experts believe other attempts to accomplish site neutrality will be forthcoming as the ruling did not ban the concept, only the method by which CMS attempted to accomplish it.

Vickie B. Ahlers


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