On October 21, 2019, U.S. District Judge Rosemary M. Collyer denied the government’s request to modify the Court’s previous ruling on September 17, 2019, that the Centers for Medicare & Medicaid Services (CMS) exceeded its statutory authority when it reduced Medicare payment rates for clinic visit evaluation and management (E&M) services provided to Medicare patients in hospital excepted off-campus provider-based departments.

Congress in the Bipartisan Budget Act of 2015 generally reduced Medicare payments for services rendered in hospital off-campus provider-based departments to approximate the rate for such services when furnished in a physician office. Pursuant to this statutory authority CMS generally pays for services provided to Medicare beneficiaries in hospital off-campus provider-based departments under the Outpatient Prospective Payment System (OPPS) but applies a Physician Fee Schedule Relativity Adjustor which approximates the rate for the services when rendered in a physician office and paid under the Medicare Physician Fee Schedule. Certain hospital off-campus provider-based departments were excepted from this general rule, including off-campus provider-based departments that were furnishing services and billing under the OPPS as of November 2, 2015. These facilities are commonly referred to as “hospital excepted off-campus provider-based departments.”

In the November 2018, Medicare Outpatient Prospective Payment System (OPPS) final rule, the Trump Administration proposed to apply the reduced Medicare payment rates for E&M services to such services when provided in hospital excepted off-campus provider-based departments. Under this rule the Medicare payment rate would be the same for E&M services rendered in hospital excepted off-campus provider-based departments, hospital non-excepted off-campus provider-based departments, and physician offices. CMS planned to phase in this payment reduction over two years and projected the policy would save Medicare approximately $300 million in 2019 and save Medicare beneficiaries $80 million in reduced copayments. Following the 2018 OPPS final rule, nearly 40 hospital groups led by the American Hospital Association filed a lawsuit alleging the new rule was contrary to law and would result in reduced Medicare payments totaling $610 million in 2019 alone.

On September 17, 2019, the Court ruled that CMS exceeded its statutory authority under the Bipartisan Budget Act when it reduced the Medicare payment rates for E&M services furnished in hospital excepted off-campus provider-based departments. CMS subsequently requested the Court modify the Order and instead remand the matter to CMS to develop a remedy, without vacatur. Alternatively, CMS asked for a 60-day stay of the Order while it considered a possible appeal.

Addressing CMS’ request for modification and stay of the Order, Judge Collyer concluded that the “ultra vires consequences of the Final Rule are not so complex that they cannot be directly redressed or undone. Vacatur and remand are the correct remedies and CMS has not established that a stay is appropriate at this time.”

While CMS argued an appeal may resolve the issue of whether the payment reductions were compliant with federal law, the Court reiterated its finding that CMS used an “impermissible interpretation of the statutory scheme; no amount of new data or reasoning on remand can save its interpretation.”

CMS must now decide within 60 days from the date of the Order whether to appeal the decision to the Circuit Court of Appeals for the D.C. Circuit.

*Special thanks to Rachel Park, Law Clerk and District of Columbia Bar license pending, for her assistance in preparing this post.