trending Market Intelligence /marketintelligence/en/news-insights/trending/RlQX85Q3yML5iTwEeZCN3Q2 content esgSubNav
In This List

Judge sides with hospitals, vacates Medicare pay change for outpatient services

Blog

A Pharmaceutical Company Capitalizes on M&A Activity with Brokerage Research

Blog

2021 Year in Review: Highlighting Key Investment Banking Trends

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Blog

Global M&A By the Numbers: Q3 2021


Judge sides with hospitals, vacates Medicare pay change for outpatient services

A federal judge has vacated a Medicare payment rate change that lowered reimbursement rates for services provided at certain hospital outpatient facilities, handing the hospital industry a win over the federal government.

Judge Rosemary Collyer for the U.S. District Court for the District of Columbia ruled Sept. 17 that the Centers for Medicare and Medicaid Services did not have the authority to lower Medicare rates for evaluation and management services at certain off-campus outpatient facilities. The judge did not issue a court order on whether CMS is required to pay back any payments that were withheld due to the rule change, which was requested by the hospital groups.

Both parties are required to submit a joint status report by Oct. 1 to determine if more briefings on remedies are needed, according to the decision.

SNL Image

The lawsuit challenged a Medicare payment rate change finalized by CMS in November 2018 and which took effect Jan. 1. The plaintiffs, led by national hospital representative the American Hospital Association, claimed that CMS' method for changing the payment rate was outside of its authority.

Under the finalized rule, CMS changed payment rates for evaluation and management services at certain off-campus outpatient facilities from the outpatient prospective payment system to the lower rate of the physician fee schedule.

Collyer highlighted in the decision that Medicare's reimbursement rate for evaluation and management services at off-campus outpatient facilities in 2017 totaled $184.44 for new patients, compared to the rate of $109.46 for similar services at physicians' offices. CMS claimed that the higher reimbursement rate was causing Medicare spending to increase unnecessarily, according to the decision.

CMS projected the savings to total about $300 million in 2019 in the finalized rule, according to the decision.

While Collyer did not directly argue with the fact that the change would save Medicare money, the judge ruled that the agency's method of change was "manifestly inconsistent" with statutes enacted by Congress.

"CMS believes it is paying millions of taxpayer dollars for patient services in hospital outpatient departments that could be provided at less expense in physician offices," Collyer said. "CMS may be correct. But CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payments only for certain services performed by certain providers."

Collyer's decision dealt a blow to what CMS refers to as site-neutral payments, a system that reimburses providers the same rate for services regardless of where a patient receives treatment. The agency has recently embraced this payment method and has proposed site-neutral payment changes for other services covered by Medicare.

AHA and the Association of American Medical Colleges praised Collyer's ruling in a Sept. 17 joint statement.

"The ruling, which will allow hospitals to maintain access to important services for patients and communities, affirmed that the cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care," the organizations said in the statement.