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'Above the Law'? Judge Criticizes 2020 Rule on Site-Neutral Payments, Lets It Stand

Analysis  |  By Steven Porter  
   December 16, 2019

Hospitals had asked the court that vacated the 2019 rule to enforce its decision against the 2020 rule as well. The judge declined. But she also faulted CMS for a course of action that 'calls its argument into serious question and appears to set the agency above the law.'

The federal judge who vacated site-neutral provisions of the Outpatient Prospective Payment System (OPPS) final rule for 2019 criticized the Trump administration for including comparable provisions in the OPPS final rule for 2020. But she stopped short of blocking the policy from taking effect next month.

The hospital plaintiffs had asked U.S. District Judge Rosemary M. Collyer to enforce her order regarding the 2019 policy against the 2020 policy as well, but Collyer ruled Monday that she lacked the jurisdiction necessary to do so.

Although the Centers for Medicare & Medicaid Services relied on the same flawed reasoning to support its 2020 rule as it did with the 2019 rule, the new policy isn't "precisely the same rule" as the old one; therefore, it falls outside the scope of her earlier decision, Collyer wrote.

That didn't stop her, however, from criticising CMS and strongly suggesting that the 2020 policy should eventually be vacated as well.

"To be clear, CMS clearly disregarded the substance of the Court's decision ... when it relied on the same ultra vires reasoning to justify its 2020 reimbursement rates," Collyer wrote. "The government has appeal rights but the Court refused to modify or stay its Order pending appeal, and the government exhibited little urgency in filing its appeal, much less in moving for a stay from the D.C. Circuit."

"Additionally, the government previously argued for a modification or stay so that it would have the opportunity to craft a prospective remedy in the first instance due to the administrative costs associated with a retroactive remedy," she continued. "CMS has now intentionally placed itself in a position to suffer those same alleged harms, which calls its argument into serious question and appears to set the agency above the law."

The government said last week both that it will appeal Collyer's decision regarding the 2019 policy and that it will automatically reprocess 2019 payments to comply with the decision, resulting in back pay for hospitals that had their payments reduced. The controversial policy, which reduces reimbursement rates for clinic visits at hospital-owned outpatient provider departments to match the rates paid for clinic visits in physician offices, is slated to take effect next month for the 2020 calendar year.

Hospitals 'Remain Confident'

The American Hospital Association, which is lead plaintiff in the case, said it expects hospitals ultimately to prevail.

"As the judge stated, CMS has placed itself in a position where it appears to be 'above the law' by instituting the 2020 cuts," AHA General Counsel Melinda Hatton said in a statement released to HealthLeaders. "Nevertheless, the court is requiring hospitals to file claims in 2020 to meet Medicare procedural requirements."

"The AHA and other plaintiffs remain confident that the courts will find the 2020 cuts to be illegal, just as they found the 2019 cuts," Hatton added.

A spokesperson for CMS said the agency is pleased with Collyer's ruling regarding the 2020 rule, noting that the dispute over the 2019 rule remains active on appeal.

"CMS will continue to work to ensure that Medicare has more choices that would lower out-of-pocket costs," the spokesperson said. "There is significant payment disparity between Medicare payments for clinic visits in certain off-campus hospital outpatient departments versus the physician office setting. CMS looks forward to implementing policies that will result in lower copayments for Medicare beneficiaries."

Healthcare consultant Rita Numerof, PhD, said the site-neutral payment policy is "essential," and she described Collyer's ruling Monday as "a win for patients."

"It brings them closer to the healthcare industry they need, an industry in which the quality of care they receive takes precedence over the building in which it's delivered," Numerof said. "Better yet, this decision indicates that we are incredibly close to a day where lawsuits stemming from deep-seated resistance to value will ultimately prove ineffective."

Related: Site-Neutral Back Pay: CMS to Give Hospitals More Money for 2019, Carry Fight Into 2020

Related: Site-Neutral Groundhog? Hospitals Urge Judge to Whack 2020 Payment Policy, Too

Editor's note: This story was updated Monday afternoon with a statement from the AHA general counsel, a CMS spokesperson, and a healthcare consultant.

“CMS has now intentionally placed itself in a position to suffer those same alleged harms, which calls its argument into serious question and appears to set the agency above the law.”

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


The judge's latest decision lets CMS implement site-neutral outpatient payments again next month.

While proponents of the policy claimed victory, the hospital plaintiffs expect to prevail eventually.

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