HHS Site-Neutral Pay Cuts are Legal

Appeals court rules HHS has the authority to reduce payments.

In November of last year, the Centers for Medicare & Medicaid Services (CMS) decided to move forward with a two-year phase-in of site-neutral payments, despite a decision in court earlier in the year siding with hospitals in their fight to keep higher outpatient payments for off-campus facilities.

Under the 2019 Medicare Outpatient Prospective Payment System (OPPS) Final Rule, CMS made payments for clinic visits site-neutral by reducing the payment rate for evaluation and management (E&M) services provided at off-campus, provider-based departments by 60 percent.

The American Hospital Association (AHA), the Association of American Medical Colleges, and dozens of individual hospitals across the nation sued the U.S. Department of Health and Human Services (HHS).

However, upon appeal, the U.S. Court of Appeals in the District of Columbia stated that HHS had the authority to reduce payments to the off-campus facilities to bring them in line with other outpatient payments.

The court held that HHS’s reduction in reimbursement for E&M services provided by off-campus, provider-based departments fell within its authority to develop a method to “control unnecessary increase in the volume of outpatient services.”

Why does this decision matter?
The court’s decision reduces hospitals’ revenue in a time that they are bleeding red ink during a pandemic.

According to HHS estimates, it could reduce hospital revenues by $880 million in 2020.

In an open call to CMS, Bruce Siegel, president and CEO of America’s Essential Hospitals, said that “allowing the Centers for Medicare & Medicaid Services to maintain its policy of deep cuts to payments for outpatient care will widen gaps in healthcare access in communities across the country. We call on Congress and the administration to reverse course on this terrible site-neutral payment policy and restore access to care for all people.”

However, as I reported in my ICD10monitor article in August, “Do Hospitals Have a Target on their Backs?”, the opinion by Chief Judge Sri Srinivasan noted that “…without site neutrality, off-campus outpatient departments can get paid up to 114 percent more than freestanding physician offices.”

This HHS ruling is an attempt to continue to combat continued rising healthcare costs, according to HHS Secretary Alex Azar. HHS in the 2019 OPPS rule reduced E&M visit payments for off-campus departments to be in line with freestanding offices, and thus site-neutral. That is when the AHA sued the department. The court’s opinion was that “the lower the reimbursement rate for a service, the less the incentive to provide it, all else being equal.”

HHS continued by noting that “if the service is already being provided for and accessible to patients, from independent physicians, why isn’t there equal or neutral payments?” That is where the hospitals lose their position in not being able to respond, beyond citing their “higher regulated” sites. The quality and access to care is still there for the patient.

AHA continues to urge Congress to reject calls for any additional site-neutral payment policies for hospital outpatient departments (HOPDs). Their position cites the pandemic, saying that Americans rely heavily on hospitals to provide 24/7 access to care for all types of patients, to serve as a safety-net provider for vulnerable populations, and to make available the resources needed to respond to disasters.

However, with the implementation of telehealth, access has expanded for these populations, and HHS believes that the payment paradigm should be equal or neutral across the board. The courts agree at this time.

Keep an eye on this story in the coming months, as there could be a shift in rulings after the Nov. 3 election on all CMS- and HHS-funded payments.

Programming Note: Terry Fletcher is a member of the ICD10monitor editorial board. Listen to her live reporting on this subject today on Talk Ten Tuesdays, 10 a.m. EST.