Federal court denies American Hospital Association review of CMS 2020 site-neutral payment cuts for hospital off-campus provider-based locations

On December 16, 2019, the U.S. District Court for the District of Columbia ruled that its 2019 decision invalidating the Centers for Medicare and Medicaid Services’ (CMS) site-neutral payment cuts does not automatically vacate the CMS site-neutral payment cuts included in the Final CY 2020 OPPS Rule issued in November.   

In September 2019, as part of a lawsuit brought by the American Hospital Association (AHA) to stop the payment cuts, the court vacated the relevant portions of the 2019 Final OPPS Rule. The cuts would have reduced 2019 payments to off-campus provider-based departments for certain outpatient Evaluation and Management (E&M) services. CMS appealed the 2019 court decision, and that appeal remains pending.

Despite the court’s ruling vacating the 2019 payment cuts, CMS included the same site-neutral payment cuts in the 2020 Final Rule. Specifically, CMS reduced payments to excepted off-campus provider-based departments for certain common outpatient E&M services to the amount CMS pays for similar services in physician offices. In the 2020 Final Rule, CMS explained that it was merely continuing the second year phase-in of the same policy adopted in 2019 because CMS believes its legal position is correct. The AHA then asked the court to strike down the 2020 Final Rule payment cuts by enforcing the 2019 court ruling.

Although the 2020 Final Rule is based on the same reasoning that the court previously found to be unlawful, the court held that the prior ruling did not automatically invalidate the payment cuts in the 2020 Final Rule. The court reasoned that the 2020 Final Rule cuts are a new agency action independently setting 2020 reimbursement rates that can be challenged only after hospitals have billed claims that are rejected and exhausted all administrative remedies.

While the court did not grant the AHA relief from the payment cuts, it acknowledged that CMS had “clearly disregarded the substance of the Court’s decision” when it relied on the same reasoning the court previously found to be unlawful to justify adopting the 2020 Final Rule.  

Despite the fact that CMS is moving forward with the 2020 payment cuts, it announced plans earlier this month to reimburse hospitals for site-neutral payment cuts the agency made to off-campus hospital facilities in 2019 based on the court’s ruling.  According to CMS, “[s]tarting January 1, 2020, and over the next few months, the Medicare Administrative Contractors will automatically reprocess claims paid at the reduced rate; no provider action needed.”