38 hospitals sue HHS over site-neutral payment policy

Wooden gavel and gold legal scale that appear to have sunlight falling on them
The hospitals argue that the changes could impact patients who seek care at hospital-owned outpatient facilities. (Getty Images/William_Potter)

Dozens of hospitals have followed in the footsteps of the American Hospital Association and are suing the Trump administration over its decision to institute site-neutral payments. 

Thirty-eight hospitals have signed on to a lawsuit (PDF) against the Department of Health and Human Services that says the agency overstepped its authority in finalizing the payment change as part of the annual outpatient prospective payment system (OPPS) rule. 

Care provided in hospital-run outpatient clinics is more “resource intensive” than care provided by an independent physician practice, the hospitals said, so instituting site-neutral payments could significantly impact patients who seek care at these facilities. 


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“The Secretary’s unlawful rate cut directly contravenes clear congressional directives and will impose significant harm on affected off-campus hospital outpatient departments and the patients they serve,” the hospitals said. 

Providers involved in the lawsuit include Montefiore Health System, Rush University Medical Center, Vanderbilt University Medical Center, Atrium Health, Ochsner Medical Center and OSF HealthCare. 

RELATED: Hospital groups decry ‘draconian’ cuts proposed by CMS in OPPS rule 

Under the previous system, Medicare paid a higher rate for services provided at a hospital’s outpatient facilities. The Centers for Medicare & Medicaid Services projects that the policy change could save beneficiaries $150 million in copayments annually, by dropping the average copay from $23 to $9. 

The different payment rates also pushed hospitals to purchase independent practices to increase their reach and take advantage of the higher reimbursement rates, CMS Administrator Seema Verma said. Neutralizing payments would increase provider competition, she said. 

However, the hospitals argue that they’ll instead be starved of money they need to provide crucial services. Site-neutral payments would reduce payments to hospitals by $380 million this year and $760 million in 2020, according to the lawsuit.  

The AHA and the Association of American Medical Colleges made similar claims in their lawsuit, which was filed in early December. The group, which has long opposed a site-neutral payment model, said it was planning legal action almost immediately following the release of the final rule in November. 

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

“These cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the real and crucial differences between them and other sites of care,” AHA President Rick Pollack said. 

Not all providers oppose the change, however. Some physician groups, including the American Academy of Family Physicians (AAFP) and the American College of Physicians, have backed the policy for some time, as have groups like the Community Oncology Alliance. 

Site-neutral payments can help keep independent community clinics open amid the industry’s ongoing consolidation, AAFP said. 

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