CMS announces continuation of second year of site-neutral payment cuts

Despite a court ruling against its site-neutral policy in September 2019, in the Calendar Year (CY) 2020 Medicare Outpatient Prospective Payment System (OPPS) final rule, released on November 1, 2019, the Centers for Medicare and Medicaid Services (CMS) announced it is implementing the second year of its site-neutral payment policy to reduce payments in excepted off-campus provider-based locations to pay the same rates for services furnished in hospital off-campus locations as it does in physician offices. 

In September, the U.S. District Court for the District of Columbia ruled that CMS exceeded its statutory authority and failed to follow the appropriate process for setting Medicare payment rates when it cut rates for certain services furnished in excepted off-campus provider-based departments (PBDs) in the CY 2019 OPPS final rule. The district court also vacated the payment cuts for CY 2019. In the CY 2019 OPPS final rule, CMS reduced payments for clinic visit services (HCPCS code G0463) furnished in excepted off-campus PBDs to be the same as the site-specific Medicare Physician Fee Schedule (MPFS) payment rate paid for the clinic visit services furnished in non-excepted off-campus PBDs. CMS did so in an effort to control unnecessary increases in the volume of the clinic visit services furnished in excepted off-campus PBDs by removing the payment differential that drives the service location decision, which CMS believes unnecessarily increases service volume. CMS phased in the application of these payment cuts in excepted locations over two years. As a result, the rate paid for these clinic visit services in excepted locations in 2019 under the MPFS is 70 percent of the OPPS rate.  

CMS is implementing this policy in a non-budget neutral manner that will not “simply increase other expenditures that are unnecessary within the OPPS and drive service-distorting decisions.” CMS raised concerns that current payment incentives are affecting site-of-service decision-making based on payment incentives rather than on other factors, such as patient acuity or medical necessity. CMS believes these shifts in site-of-service to higher cost hospital PBDs are unnecessary if beneficiaries can safely receive the same services in a lower cost setting and also result in unnecessary increases in beneficiary cost-sharing payments.

Although the district court vacated the payment cuts for 2019, CMS believes it has the necessary statutory authority and is implementing the second year of the two-year phase-in of payment cuts for the clinic visits in excepted PBDs. In 2020, the second year of the two-year phase-in, the rate paid for these clinic services under the MPFS is 40 percent of the OPPS payment for CY 2020. CMS estimates that the Medicare program will save approximately $640 million, and Medicare beneficiaries will save approximately $160 million due to reduced copayments, as a result of these payment cuts in CY 2020. 

As of the release of the final rule, CMS is still evaluating its appeal options from the district court’s final order. CMS disagreed with commenters who felt that CMS should suspend the payment cuts until the ongoing litigation is concluded, stating that  “freezing the payment rate, even at the 2019 rate, still ‘traps’ the unnecessary spending within the OPPS.”  While it is considering a possible appeal, CMS is determining what steps it could take to ensure that affected CY 2019 claims are paid in accordance with the district court’s final order vacating the 2019 payment cuts if it declines to appeal or if an appeal is unsuccessful.