The hospital industry failed to convince a federal judge to strike down the Trump administration's Medicare payment cuts to off-campus clinics set to go into effect next year.
U.S. District Court Judge for the District of Columbia Rosemary Collyer on Monday found the cuts starting Jan. 1 can continue. The ruling means that hospitals could face a 60% reduction in Medicare payments for off-campus hospital outpatient departments.
The Centers for Medicare & Medicaid Services (CMS) started the payment reduction to off-campus clinics this year. The goal was to bring payments to such clinics in line with payments to standalone physician offices.
But Collyer ruled in September in a lawsuit brought by the American Hospital Association (AHA) and other hospital groups that CMS did not have the authority to institute the cuts for 2019.
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Starting next year, CMS will reprocess claims paid to affected hospital clinics at the reduced rate in order to repay hospitals $380 million in cuts, according to a CMS newsletter released last week.
However, last month CMS released a final hospital payment rule for 2020 that called for the cuts starting Jan. 1. The final rule said that the cuts were a “continuation” of the cuts that were installed for 2019.
Hospital groups slammed the decision and went back to court to get the 2020 cuts struck down. But Collyer said in her opinion AHA did not meet the statutory requirements for a court to examine Medicare rates. Federal law says that to challenge a payment rule in court, the plaintiff must first submit a payment claim to the Department of Health and Human Services (HHS).
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HHS argued in legal filings that hospitals did not submit a claim for the 2020 rates because they haven’t gone into effect. Essentially hospitals must wait until the payment cuts start to sue for relief.
The AHA argued that the 2020 final rule is “merely a continuation of the 2019 final rule, such that a properly presented challenge to the latter is a challenge to the former,” Collyer’s opinion said.
Collyer said that each year CMS must put together a new rule outlining new reimbursement rates for hospitals. Collyer’s 2019 ruling only applied to the 2019 payment rule, and the court doesn’t have any jurisdiction over the 2020 rule, but Collyer pointed out that CMS “clearly disregarded the substance” of her earlier decision.
The AHA was heartened that Collyer found CMS is putting it in a position where it "appears to be 'above the law' by instituting the 2020 cuts," said General Counsel Melinda Hatton.
The AHA and other plaintiffs "remain confident that the courts will find the 2020 cuts to be illegal, just as they found the 2019 cuts."
CMS, however, was pleased with the ruling and will appeal Collyer's earlier ruling on the legality of the 2019 site-neutral cuts, a spokesperson said.
"There is significant payment disparity between Medicare payments for clinic visits in certain off-campus hospital outpatient departments versus the physician office setting," the spokesperson said.
CMS employed a similar tactic for nearly 30% in cuts to payments for the 340B drug discount program. A court ruling struck down the cuts that went into effect in 2017. Despite this ruling, CMS included more 340B cuts in the 2020 payment rule.