Federal Judge Overturns Medicare’s Site-Neutral Policy

Managed Care Contracting Health Care Consulting

On September 17, 2019, a federal judge ruled that CMS exceeded its authority by expanding a site-neutral payment policy to hospital clinic visits. “CMS believes it is paying millions of taxpayer dollars for patient services in hospital outpatient departments that could be provided at less expense in physician offices,” she wrote in her decision. “CMS may be correct. But CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payments only for certain services performed by certain providers.” The ruling represents a major win for hospitals that banded together to take legal action against the U.S. Department of Health & Human Services shortly after the site-neutral policy was finalized earlier in 2018 and took effect January 1, 2019.

“CMS believes it is paying millions of taxpayer dollars for patient services in hospital outpatient departments that could be provided at less expense in physician offices,” she wrote in her decision. “CMS may be correct. But CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payments only for certain services performed by certain providers.” – Federal Judge

The hospitals also requested a court order requiring CMS to issue payments improperly withheld due to the final rule. The judge didn’t grant that request but did order CMS to submit a joint status report by October 1, 2019, “to determine if additional briefing on remedies is required.”

BKD professionals are closely monitoring this development and the potential implications. If CMS’ current site-neutral payment policy is ultimately struck down, hospitals may see a window of opportunity to revisit off-campus, provider-based clinic payments while CMS tries to get the policy approved through the proper congressional rule-making procedures.

Expect more to come in the upcoming months. Please reach out to your BKD trusted advisor or use the Contact Us form below if you have questions.


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