In its hospital outpatient prospective payment system (OPPS) Final Rule for calendar year 2020, CMS finalized its proposal to implement the planned phase‑in (already underway) of a site-neutral payment policy (i.e., payment cuts) for outpatient clinic visits (HCPCS code G0463) furnished at longstanding off-campus hospital provider‑based departments (PBDs). This latest site-neutral payment rule is notable for two reasons. First, it expressly applies to outpatient clinic visits that are statutorily excepted from the site-neutral payment rule enacted by Congress in November 2015, which exempts services furnished at off-campus PBDs that were in operation at that time. Second, CMS’s decision to continue with the planned payment cuts ignores a recent federal court decision vacating this payment rule. Specifically, the US District Court for the District of Columbia held in September 2019 that CMS had exceeded its statutory authority in promulgating the rule in a non-budget-neutral manner. (For more information about the payment rule at issue and the recent court case, please refer to Dentons’ prior client alert regarding the American Hospital Association, et al. v. Azar decision.)

In the Final Rule, CMS acknowledges the ongoing litigation, but takes issue with the district court’s holding that CMS’s rate adjustment at issue was statutorily required to be implemented in a budget-neutral fashion and explains that CMS is still evaluating whether to appeal the district court’s decision. Thus, CMS disagrees with commenters’ suggestions that it should reinstate full-OPPS payments for these clinic visit services or, at minimum, maintain the 2019 payment rates (i.e., 70 percent of OPPS rates) for another year. To the contrary, CMS states that in light of the ongoing litigation, and although CMS is “working to ensure affected 2019 claims for clinic visits are paid consistent with the court’s order,” CMS “do[es] not believe it is appropriate at this time” to change the second year of the planned two-year phase‑in of the challenged payment rule. Thus, CMS affirms that it will move forward with the planned rate cuts, reducing payments for the target outpatient clinic visits to 40 percent of OPPS rates in 2020.

CMS also acknowledges many commenters’ suggested remedies for how CMS might make hospitals whole for outpatient clinic visits in statutorily excepted off-campus PBDs that were subject to the 2019 payment cuts vacated by the district court. Many commenters advocated for “lump sum” payments with interest or claim-by-claim payment adjustments covering the difference between (1) hospitals’ actual payments received and (2) the amounts that would have been paid, had the site-neutral payment policy not been implemented. CMS reiterates that it is contemplating whether to appeal the district court’s holding, and in the meantime, is “still considering” how to remedy hospitals if it either chooses not to appeal, or if it does not succeed on appeal. In short, corrected payments for 2019 clinic visits do not appear to be immediately forthcoming.

Also relevant, the Medicare Payment Advisory Commission (MedPAC) submitted comments in favor of the outpatient site-neutral payment policy and also presented a study at its recent public meeting (on November 7) that supports expansion of such payment policies. The study, which was commissioned by the US House of Representatives Committee on Energy and Commerce, examines the effects of hospital consolidation and vertical integration on the costs of health care. It concludes that hospital acquisition of physician practices continues to drive increases in health care costs for patients and insurers, and that site-neutral payment policies reduce incentives for mergers that will not increase efficiencies. Further analysis and recommendations will be presented in MedPAC’s March 2020 report to Congress.

Dentons is closely following these developments regarding Medicare site-neutral payment policies, and will provide additional updates as they unfold.