Hospitals file new lawsuit to halt 2020 site-neutral payment cuts

Gavel and flag in courtroom
The hospital industry launched a new legal effort to halt major cuts to off-campus hospital outpatient clinics. (Getty/AlexStar)

Several hospital groups have sued the Trump administration to halt the latest round of cuts to hospital outpatient departments that went into effect this year.

The American Hospital Association, the Association of American Medical Colleges and several hospital members filed the lawsuit on Monday in the U.S. District Court for the District of Columbia.

The Centers for Medicare & Medicaid Services (CMS) started a two-year effort in 2019 to cut payments to off-campus hospital outpatient clinics to bring the payments in line with standalone physician offices. CMS has complained of Medicare paying hospitals more for the same services a physician clinic gives. A federal judge ruled in September 2019 that CMS didn’t have the authority to make the 2019 cuts.

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However, CMS decided to go ahead with the second round of cuts that started Jan. 1. Hospitals could face a 60% reduction in Medicare payments to off-campus outpatient departments if the cuts aren’t reversed.

Hospitals sued in December to stop the 2020 cuts from going into effect, but Judge Rosemary Collyer said the cuts can continue. She said that hospitals must first wait until the new cuts went into effect to take legal action.

Now, hospitals are returning to court since the cuts have started.

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The hospital industry charges that any cuts to covered hospital outpatient services that target only specific items or services “must be budget-neutral,” their lawsuit said (PDF).

But the 2020 cuts to hospital outpatient services target “a select group of services for non-budget-neutral payment adjustments,” the lawsuit added. “CMS cannot exercise its limited authority in a manner so flagrantly inconsistent with the Medicare statute.”

CMS said in December that it is working to reprocess claims paid to affected hospital clinics to repay hospitals $380 million in cuts for the 2019 year.

The agency did not immediately return a request for comment as of press time.