AHA, AAMC Sue HHS Again Over Outpatient Site-Neutral Payments

January 15, 2020 - Hospital stakeholders filed a lawsuit on Monday challenging HHS’ most recent attempt to implement site-neutral payments for certain outpatient services rendered in hospital settings.

Contending that hospitals are “suffering and face imminent actual injury” as a result of the site-neutral payment policy in 2020, the American Hospital Association (AHA), Association of American Medical Colleges (AAMC), and several member hospitals asked a federal judge for preliminary and permanent relief.

“If the 2020 Final Rule is left in place, Plaintiff-Hospitals and Plaintiffs AHA’s and AAMC’s members face the prospect of serious payment reductions for affected services, and may have to make difficult decisions about whether to reduce services in response to the lowered payment rate,” the groups stated in the lawsuit.

Site-neutral payments for outpatient services delivered in off-campus hospital provider-based departments have been on the chopping block before. Last year, AHA and AAMC challenged a 2019 rule that cut payments to the departments by $380 million through site-neutral payments.

US District Judge Rosemary M. Collyer ruled in favor of the hospital stakeholders, deciding that CMS did not have the authority to apply site-neutral payment rates to certain services in a non-budget neutral manner as a means to reduce unnecessary increases in volumes.

Judge Collyer overturned the rule in 2019, and CMS is in the process of repaying hospitals the difference between what they would have made without the rule and the reduced rate under the site-neutral payment methodology.

But CMS is still trying to implement site-neutral payment rates for the clinic services it feels could be safely delivered in the physician office. The agency finalized site-neutral payment rates for the same services in the 2020 Outpatient Prospective Payment System (OPPS) rule, which the policy would reduce payments by approximately $800 million in 2020.

CMS explained in the rule that it is appealing Judge Collyer’s decision. Therefore, it will move forward with the implementation of site-neutral payments in 2020.

Now that hospitals have filed claims in 2020, AHA, AAMC, and its members are going after the final rule.

For the same reasons as the 2019 final rule, the new policy exceeds CMS’ statutory authority to alter hospital payment rates, the groups stated in the lawsuit.

“Congress has established a clear structure for CMS to make annual changes to payments for covered hospital outpatient services under Medicare,” they wrote. “Changes to payment that target only specific items or services must be budget neutral. And yet the 2020 Final Rule purports to do precisely what Congress has expressly prohibited: reduce total payments for covered hospital outpatient services for CY 2020 by hundreds of millions of dollars by targeting a select group of services for non-budget-neutral payment adjustments.”

“CMS cannot exercise its limited authority in a manner so flagrantly inconsistent with the Medicare statute. That is textbook ultra vires action—as this Court has already held,” the groups added.

The 2020 final rule “should meet the same fate” as its predecessor, the groups emphasized in the lawsuit.

“CMS may not contravene clear congressional mandates merely because the agency wishes to make cuts to Medicare spending,” they argued. “And the agency’s conduct in issuing the 2020 Final Rule is all the more stark because this Court has already rejected CMS’s identical attempt to replace Congress’s unequivocal directives with the agency’s own policy preferences.”