Hospitals sue CMS again over site-neutral payments


Hospitals once again sued the Centers for Medicare and Medicaid Services over its site-neutral payment policy. The final rule reduced Medicare reimbursement rates for procedures conducted in hospital outpatient departments, bringing them closer to what CMS currently pays for procedures conducted in-office and at ambulatory surgical centers. The policy is expected to save Medicare an estimated $800 million in 2020.

The American Hospital Association and Association of American Medical Colleges filed suit against CMS on Monday, saying CMS’ adjustments were unlawful and flouted a judge’s previous ruling against the cuts. The two groups had previously sued over site-neutral payments in 2019.

In September, U.S. District Court Judge Rosemary Collyer ruled that CMS had overstepped its statutory authority, noting changes to payments must be budget-neutral and could not target specific services. Because of that ruling, CMS will have to repay hospitals the difference for 2019, to the tune of roughly $380 million. However, Collyer’s ruling does not apply to the planned reductions in 2020.

“The 2020 Final Rule is no less an impermissible flex of regulatory authority than the 2019 Final Rule, and should meet the same fate,” AHA and AAMC stated in the complaint.

They added that if the rule is left in place, hospitals “…may have to make difficult decisions about whether to reduce services in response to the lowered payment rate. This is particularly troubling for hospitals already operating at low or negative margins.”

While hospitals have voiced opposition to the changes, some medical groups support them. The American Medical Association previously released statements in support of site-neutral payments, but with the stipulation that they should not result in a total reduction in Medicare payments.

“Medicare physician payment has not kept pace with the actual costs of running a practice,” the AMA wrote in a 2019 issue brief, seeking a reevaluation of payments for in-office procedures.

The Department of Health and Human Services is appealing the 2019 ruling to the U.S. Court of Appeals for the District of Columbia Circuit.


Photo credit: zimmytws, Getty Images 

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