On Friday, July 17, 2020, the Court of Appeals for the District of Columbia found in favor of the U.S. Department of Health and Human Services (“HHS”) by holding that Medicare Part B payment cuts to certain services provided to Medicare beneficiaries in off-campus provider-based departments (“PBDs”) are within the agency’s statutory authority. More specifically, the Court held that the Centers for Medicare & Medicaid Services (“CMS”) FY 2019 Outpatient Prospective Payment System final rule (“OPPS”) policy to pay formerly grandfathered off-campus PBDs clinic visit services at the same rate as physician practices (see Health Law Pulse article here) was legal because it “rests on a reasonable interpretation of HHS’s statutory authority to adopt volume-control methods.” In response to the decision, the American Hospital Association (“AHA”) stated that it is “carefully reviewing the decision to determine [its] next steps.”
Background on the Case
In 2015, Congress enacted section 603 of the Bipartisan Budget Act of 2015 in an effort to the control the increase in services provided at off-campus PBDs. Section 603 provided that new off-campus PBDs would no longer be paid OPPS rates. In its 2019 OPPS final rule, CMS finalized a policy to expand site-neutral payment to clinic visit services performed in off-campus PBDs excepted from payment reductions under Section 603.
Specifically, for CY 2020 and subsequent years, the payment rate for services described by HCPCS code G0463, when furnished in an excepted off-campus PBD, will be paid the site-specific Medicare Physician Fee Schedule rate for a clinic visit service, that is 40 percent of the OPPS rate. CMS considered additional payment cuts for services provided at off-campus PBDs by reducing the payment rate for evaluation and management (“E&M”) services. CMS explained in its final rule that the agency believed that these reductions were necessary because of the continued increase in the number of services provided in off-campus PBDs rather than in physician offices. CMS stated that it believed “capping the OPPS payment at the Physician Fee Schedule (PFS)-equivalent rate is an effective method to control the volume of the unnecessary increases in certain services because the payment differential that is driving the site-of-service decision will be removed.” Despite CMS’s statutory requirement to implement OPPS payments in a budget-neutral manner, CMS implemented these reductions “without offsetting increases in reimbursements for other covered services.”
After this site neutral policy was finalized, the AHA challenged the policy in an effort to overturn this final rule. In September 2019, the U.S. District Court for the District of Columbia agreed that “CMS was not authorized to ignore the statutory process for setting payment rates in the [OPPS] and to lower payments only for certain services performed by certain providers.” Following this decision, HHS appealed this ruling to the D.C. Court of Appeals and included the same site neutral policy to off-campus PBDs in the FY 2020 OPPS final rule.
Court of Appeals Opinion
The Court of Appeals for the D.C. Circuit first considered whether it had jurisdiction to hear the case. In the OPPS statute, 42 U.S.C. § 1395l(t)(12)(A) states that “’there shall be no administrative or judicial review of’ certain specific actions HHS takes in implementing the OPPS, including ‘the establishment of… methods’” to control the volume of covered outpatient services (emphasis added). In response to HHS’s argument that “non-budget-neutral” E&M management service cuts are barred under this portion of the OPPS statute from judicial review since they are “’methods,’” the Court held that this argument was “inapplicable unless HHS’s challenged action qualifies as a ‘method for controlling unnecessary increases… in volume’” (emphasis added). Since Congress did not “unambiguously forbid the agency” from implementing specific service, non-budget neutral cuts, the Court held that this was a “’method’’” CMS could use for reducing volume. The Court explained that CMS had been empowered by the statute to determine “whether there has been too much growth in outpatient service volume and if the agency decides there has”, the agency’s response of cutting specific service reimbursements from specific providers could not be judicially reviewed by the court.
Next, the court considered whether section 603 of the Bipartisan Budget Act of 2015 prohibits the outpatient payment cuts implemented in the 2019 OPPS final rule. The AHA argued that Congress’s choice not to address the rates paid to preexisting off-campus PBDs in section 603 must mean that it should be “read to bar HHS from cutting reimbursement rates for those facilities.” The Court found that nothing in the statute “forever exempt[s]” adjustments to grandfathered off-campus PBDs’ reimbursements and that nothing in this statutes stands “in the way of the agency’s challenged rate reduction.” Instead, section 603 merely leaves the “exempted providers subject to all the provisions of the OPPS statute.”
The AHA estimated that this site-neutrality policy cost providers roughly $380 million in 2019. With the COVID-19 pandemic significantly negatively impacting hospitals’ financial condition, the implementation of this reduction in payment for clinic services at off-campus PBDs may have far-reaching negative financial implications for hospital systems.
Norton Rose Fulbright attorneys will continue to provide relevant updates on site neutrality and the implications of this decision.