Changes set to take effect next month will result in a significant reimbursement reduction for hospital-owned outpatient departments that would otherwise be grandfathered into a higher tier.
Two national hospital groups and three individual hospitals sued the Trump administration Tuesday over outpatient payment policy changes set to take effect on New Year's Day.
The changes, which the Centers for Medicare & Medicaid Services finalized last month, represent "an unprecedented assertion of the agency's authority," the hospitals said in their complaint alleging that CMS overstepped its legal bounds.
Central to the suit is the difference between "excepted" and "non-excepted" off-campus hospital provider-based departments. The final rule for 2019 "effectively abolishes any distinction" between the two groups, resulting in hundreds of millions of dollars in payment reductions for hospital-owned departments that would otherwise be grandfathered into a higher reimbursement tier, the plaintiffs wrote.
"CMS cannot exercise its limited authority in a manner so flagrantly inconsistent with the Medicare statute," they wrote.
"CMS may not contravene clear congressional mandates merely because the agency wishes to make cuts to Medicare spending," they added.
The suit alleges, furthermore, that CMS was required to make these changes in a budget-neutral fashion but instead finalized changes that would result in a $380 million reduction next year followed by a $760 million reduction in 2020.
The legal challenge—which was brought by the American Hospital Association; the Association of American Medical Colleges; Mercy Health Muskegon in Muskegon, Michigan; Olympic Medical Center in Port Angeles, Washington; and York Hospital in York, Maine—was expected, as hospitals have been saying for months that the policy change would harm them and appears to be illegal.
In addition to the plaintiffs in this case, the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System changes for 2019 have drawn criticism from other groups, such as America's Essential Hospitals, plus lawmakers in both houses of Congress.
A bipartisan group of 48 senators signed a letter in September urging CMS to rethink its approach, and a bipartisan group of 138 representatives followed suit in October with a similar letter of their own.
CMS Administrator Seema Verma has said it simply "doesn't make sense" for Medicare to pay higher rates to hospital-owned outpatient departments than it does to physician offices for some of the same services.
Steven Porter is editor at HealthLeaders.