Judge strikes down Trump administration's site-neutral payments rule

Gavel court room lawsuit judge
A federal judge sided with hospitals in the battle over site-neutral payments. (Pixabay)

In a huge win for hospitals, a federal judge has tossed the Trump administration's rule instituting site-neutral payments.

District of Columbia Judge Rosemary Collyer ruled Tuesday that the Centers for Medicare & Medicaid Services (CMS) overstepped its authority when it finalized a plan to extend a site-neutral payment policy to clinic visits with the goal of paying the same in Medicare for evaluation and management services at physician offices and hospitals.

Hospital groups immediately rebelled against the plan. Within hours of the rule's finalization in November, the American Hospital Association (AHA) vowed to challenge the change, as it would cut payment rates to hospitals significantly. AHA and the Association of American Medical Colleges formally did so about a month later.

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Thirty-eight individual hospitals followed suit in January.

RELATED: CMS’ site-neutral payment plan could lead to access problems as hospitals cut services 

CMS argues that the payment change would save Medicare beneficiaries $150 million per year, lowering average copays from $23 to $9. Those savings, however, are coupled with significant payment cuts to hospitals; the AHA estimated losses of $380 million in 2019 and $760 million in 2020.

In her order, Collyer said that the rule did not meet the standard of a method to control unneeded hospital use, as CMS argued in court filings.

"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. CMS may be correct," the judge wrote. "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."

Collyner did not require CMS to pay funds lost under policy change so far this year and instead requested a status report by Oct.1 from both parties to determine whether additional briefings are required to decide a suitable resolution.

In a statement, the AHA and AAMC praised the judge's decision.

"The ruling, which will allow hospitals to maintain access to important services for patients and communities, affirmed that the cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care," the hospital groups said. "Now that the court has ruled, it is up to the agency to put forth remedies for impacted hospitals and the patients they serve."

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