More on Reimbursement

Court rules in favor of hospitals on site-neutral payments

The decision saves hospitals from a $760 million rate cut in 2020.

Susan Morse, Managing Editor

A federal judge has ruled in favor of hospitals over site-neutral payments.

The judge agreed that the Centers for Medicare and Medicaid Services overstepped its authority in making payment changes to the outpatient prospective payment system that reduced the rate grandfathered off-campus hospital facilities received.

Also, the final rule is unlawful because it is not budget-neutral.

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Thirty-eight hospitals sued in a case consolidated under the American Hospital Association as plaintiff.

On Tuesday, United States District Court Judge Rosemary Collyer ordered the AHA's motion for summary judgment granted and denied the cross-motion from Health and Human Services Secretary Alex Azar.

HHS had argued that the volume of outpatient services has increased as stand-alone physician offices have been integrated into hospital operations.

The judge ordered that Azar's method to control for unnecessary increases in the volume of outpatient services be vacated and remanded this piece back to the Secretary for further proceedings.

The parties are to file a joint status report no later than October 1.


The final rule issued by the Centers for Medicare and Medicaid Services in November 2018 did away with grandfathered higher payments to off-campus facilities that were acquired or built before November 2, 2015.

The final rule aimed to pay hospital outpatient facilities at the same lower rate as physician practices, a decision that would have resulted in hospitals getting a rate cut of $380 million in 2019 and $760 million in 2020. The lower reimbursement would especially hit those hospitals with a large Medicare population.


Congress had made the provision for separate payment rates to hospitals and off-campus departments in 2015. Before this, off-campus facilities were billing at the higher hospital payment rate. As a compromise, Congress said that those off-campus departments that were already billing under the hospital  payment system would be exempted from the new rate.

But because of the final rule, as of January 1, all off-campus provider-based departments would now receive the lower rate given to the newer, non-excepted off-campus facilities.


"The U.S. District Court's ruling yesterday evening that the government overstepped its authority by cutting payments to hospital outpatient clinics is a victory for vulnerable patients and an important step toward protecting access to care in underserved communities," said Bruce Siegel, MD, president and CEO of America's Essential Hospitals.

Consultant Advis released a statement saying of the outcome: "This ruling is a positive step towards understanding that providing services to patients as a hospital department is not synonymous with physician clinic services.  Hospital outpatient services are operating under the main hospital's policies, quality standards and regulatory requirements. This level of quality and efficient care should be recognized in the reimbursement."

Twitter: @SusanJMorse
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