July 21, 2020

U.S. Court of Appeals Decision to Allow Site-Neutral Payment Reduction

Last week, the United States Court of Appeals for the District of Columbia Circuit ruled that the Department of Health and Human Services (HHS) has the authority to cut payments to off-campus, provider-based departments for E/M services to make them equivalent to the rate paid to physician offices. This comes after the American Hospital Association (AHA) and various hospitals challenged the hospital site-neutral payment policy in court. The AHA argued that the policy exceeded HHS’ authority to alter hospital outpatient reimbursement rates, which was enacted in a non–budget-neutral manner. The court decided HHS has the authority to reduce payments to the off-campus facilities to bring them in line with physician office payments. In 2019, the Centers for Medicare & Medicaid Services (CMS) finalized to expand its site-neutral payment policy to clinic visits at all off-campus hospital outpatient departments.

CMS proposed to implement the payment reduction over two years. In 2019, clinic visits will be paid approximately 70 percent of the OPPS rate, and in 2020 and beyond, 40 percent of the OPPS rate. CMS implemented this provision in a non–budget-neutral way and estimated it will remove $380 million from Medicare spending for outpatient care in 2019 and $640 million in 2020.

CMS began implementing payment neutrality between hospital outpatient departments and physician offices in 2017 by reducing payments for certain off-campus hospital outpatient departments to an equivalent amount paid under the Physician Fee Schedule. The site-neutral payment policy does not apply to on-campus hospital outpatient departments, which are located within 250 yards of the hospital.