Hospitals notch loss as appeals court upholds HHS site neutral payments

Dive Brief:

  • HHS was acting within its authority when it reduced some payments to off-campus hospital outpatient departments to make them consistent with other outpatient payments, according to an opinion filed Friday from the U.S. Court of Appeals for the District of Columbia.
  • The ruling reverses a district court decision that determined the rate change in the 2019 Outpatient Prospective Payment System was outside of HHS authority. The American Hospital Association and other hospitals fighting the change had argued HHS did not act in the required budget-neutral manner and also otherwise flouted congressional intent.
  • AHA General Counsel Melinda Hatton said in a statement to Healthcare Dive the group is disappointed in the ruling and is considering its options going forward. She said the ruling “fails to account for the fundamental differences between hospital outpatient departments and other sites of care. Hospitals are open 24/7, held to higher regulatory standards and are often the only point of access for patients with the most severe chronic conditions, all of whom receive treatment regardless of ability to pay.”

Dive Insight:

Congress in 2015 passed a law declaring that new off-campus departments would not be paid at the same rate as the other outpatient providers. But hospitals were still getting paid far more than other providers for services at departments that existed prior to that change.

The opinion by Chief Judge Sri Srinivasan notes that without site neutrality, off-campus outpatient departments can get paid up to 114% more than freestanding physician offices.

In an attempt to combat the continued rising costs, HHS in the 2019 OPPS rule reduced E/M visit payments for off-campus departments to be in-line with freestanding offices and thus site neutral. AHA then sued the department.

Despite losing at the district court level, which set aside the rate change, HHS again included it in the 2020 OPPS. AHA filed another lawsuit over that rule.

Srinivasan wrote that HHS did act properly in trying to reduce the number of visit being paid at the higher rate.

“Reducing the payment rate for a particular OPPS service readily qualifies, in common parlance, as a ‘method for controlling unnecessary increases in the volume’ of that service,” according to the opinion. “The lower the reimbursement rate for a service, the less the incentive to provide it, all else being equal. Reducing the reimbursement rate thus is naturally suited to addressing unnecessary increases in the overall volume of a service provided by hospitals.”

He also rejected hospitals’ arguments that changing the rate circumvented congressional intent in the 2015 law.

Posted in Law

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