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CMS to Repay Hospitals Millions After Court Finds Reduction in Rates Improper

On December 12, 2019, the Centers for Medicare and Medicaid Services (CMS) announced that it will automatically reprocess claims which had been reimbursed at a reduced rate in 2019 under the site-neutral payment policy and pay hospitals monies that were withheld due to the policy.

In November 2018, CMS promulgated a Final Outpatient Prospective Payment System (OPPS) Rule and implemented its site-neutral payment policy, which cut Medicare reimbursement rates for outpatient hospital services provided at certain off-campus provider-based departments (PBDs) to the lower Physician Fee Schedule (PFS) rate for the clinic visit services – a 60 percent reduction from the OPPS reimbursement rate for the same service. CMS planned to phase in application of this payment reduction over two years. The American Hospital Association, Association of American Medical Colleges and nearly 40 hospitals challenged the policy, arguing that the Medicare Act did not allow CMS to cut the rates. CMS believed that it could develop a method to set payment rates for a particular service which is causing “an unnecessary increase in cost and volume without regard to budget neutrality.”

On September 17, 2019, the District Court for the District of Columbia (DC District Court) ruled that CMS exceeded its statutory authority and ignored the statutory process when it implemented its site-neutral payment policy at off-campus hospital clinics and cut reimbursement rates. The DC District Court ordered CMS to cease this reduction for calendar year 2019 but did not opine on what to do with already withheld payments. CMS has decided to automatically reprocess claims already paid at the reduced rates in 2019, which will result in increased payments to some off-campus PBDs. No provider action is needed.

Interestingly, in its November 2019 rule detailing OPPS policies for 2020, CMS acknowledged the DC District Court ruling yet stated it would continue with implementing the 2020 reductions. CMS indicated: “We do not believe it is appropriate at this time to make a change to the second year of the two-year phase-in of the clinic visit policy.” Since the release of the court ruling, CMS has appealed the decision showing that it is still committed to implementing the site-neutral payment policy.

Uncertainty remains regarding reimbursement rates under OPPS pending the appeal of the opinion and the November 2019 rule implementation. However, the CMS news release provides clarity that for 2019, CMS will automatically reprocess claims reimbursed at a lower rate under the site-neutral payment policy, and pay out monies withheld and owed to eligible providers.

This post was co-authored by Michael Lisitano, legal intern at Robinson+Cole. Michael is not yet admitted to practice law.

Copyright © 2020 Robinson & Cole LLP. All rights reserved.National Law Review, Volume IX, Number 347

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