In another recent victory for hospitals, the U.S. District Court for the District of Columbia held that the Centers for Medicare and Medicaid Services (CMS) exceeded its statutory authority when it expanded Congress’ site neutral payment mandate in Section 603 of the Bipartisan Budget Act of 2015 (BBA) to grandfathered sites under the BBA.¹ CMS’s CY 2019 Outpatient Prospective Payment System (OPPS) Final Rule slashed reimbursement for “excepted” off-campus provider-based departments by applying the corresponding Physician Fee Schedule rate to Evaluation and Management (E&M) G-code services provided at such locations.² As a result, CMS essentially equalized the payment rate for E&M services provided at excepted off-campus provider-based departments (PBDs), nonexcepted off-campus PBDs, and physician offices alike, despite a statutory exception for grandfathered sites mandated under the BBA.³ CMS opted to ignore the mandated exception in the BBA in favor of implementing a policy that, in CMS’s view, was intended to curb growth in Medicare spending at excepted sites. Following challenges from numerous hospital organizations, the Court concluded that CMS was not authorized to ignore the statutory process for setting payment rates in the OPPS and simply lower payments for certain services performed by certain providers. Notably, the Court found that CMS’s authority to control expenditures under the Medicare program did not authorize it to unilaterally set outpatient department service-specific rates under the OPPS without regard to their relative position or budget neutrality.⁴

The Court ultimately vacated the applicable portions of the 2019 OPPS Final Rule but remanded the matter back to CMS to craft the appropriate remedy consistent with the Court’s opinion.⁵ While the Court recognized the complications associated with an order to vacate, it also noted that CMS did not apply the applicable portions of the Final Rule in a budget neutral manner and that this, among other considerations, should lessen the burden for the Agency on reconsideration.⁶ Although the implementation of the full E&M cut was staggered over two years, CMS projected an estimated savings of $300 million in 2019 alone.⁷ The parties submitted a joint status report on October 1, 2019,8 however, the HHS has filed a motion requesting that the Court modify its order to remand the matter without vacatur or, alternatively, stay the portion of its order vacating the Final Rule for 60 days while HHS assesses whether to appeal the Court’s decision.⁹ Pursuant to the CY 2020 OPPS Proposed Rule, CMS will continue the phasein of the reduction for certain services furnished in excepted off-campus PBDs.¹⁰ However, it remains to be seen whether CMS will appeal the Court’s decision and push its CY 2020 proposal forward, or back track from the proposal given the Court’s recent opinion. Polsinelli believes that providers should expect CMS to appeal the Court’s initial ruling due to the potentially widespread implications it could have on HHS’ ability to administratively adjust payment rates for select items and services provided in certain hospital settings. It is also likely that CMS will continue to pursue the payment reduction in the CY 2020 OPPS Final Rule. As Polsinelli’s reimbursement team noted in a previous article, CMS faced a similar roadblock recently when trying to unlawfully discriminate against 340B covered entities.¹¹ Pursuant to the CY 2020 OPPS Proposed Rule, CMS confirmed it will continue the 2018 and 2019 underpayment policy for certain 340B covered entities unless the D.C. Court of Appeals upholds the lower court’s ruling that it is unlawful.12 If history is any lesson, CMS will stay its course and appeal adverse determinations that impact its ability to pay different providers different rates while aggressively pursuing these unlawful payment policies in future rules.

1 Am. Hosp. Assoc. v. Azar, No. 1:18-CV-2841-RMC, 2019 WL 4451998,at *12 (D.D.C. Sept. 17. 2019).

2 83 Fed. Reg. 58818, 58822 (Nov. 21, 2018).

3 42 U.S.C. § 1395l(t)(21)(B)(ii).

4 Am. Hosp. Assoc. v. Azar, No. 1:18-CV-2841-RMC, 2019 WL 4451998, at *11 (D.D.C. Sept. 17. 2019).

5 Id., at *12.

6 Id.

7 Id., at *5.

8 See Joint Status Report, Am. Hosp. Assoc. v. Azar, No. 1: No. 1:18-CV-2841-RMC, No. 1:19-CV-00132-RMC (D.D.C Oct. 1, 2019)

9 See Defendant’s Motion to Modify Order, Am. Hosp. Assoc. v. Azar, No. 1: No. 1:18-CV-2841-RMC, No. 1:19-CV-132-RMC (D.D.C Sept. 23, 2019); see also Defendant’s Reply in Support of Motion to Modify Order, Am. Hosp. Assoc. v. Azar, No. 1: No. 1:18-CV-2841-RMC, (D.D.C. Oct. 7, 2019)

10 84 Fed. Reg. 39398, 39401 (Aug. 9, 2019).

11 Am. Hosp. Assoc. v. Azar, 385 F.Supp.3d 1 (D.D.C. May 6, 2019).

12 84 Fed. Reg. 39398, 39401 (Aug. 9, 2019).