AHA, AAMC Want Rehearing for Hospital Site-Neutral Payment Case

The fight against site-neutral payments for hospital outpatient services is not over for two industry groups.

The American Hospital Association (AHA) and the Association of American Medical Colleges (AAMC) recently announced that they are seeking a rehearing in the US Court of Appeals for the District of Columbia. The court ruled earlier this month that HHS has the authority to lower hospital outpatient reimbursement to rates closer to those paid to physicians for the same services.

The cuts are expected to cost hospitals about $610 million in 2019 alone.

“These illegal 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 AHA and AAMC said in the announcement. “These hospital outpatient departments are held to higher regulatory standards and are often the only point of access for patients with the most severe chronic conditions, all of whom receive treatment regardless of ability to pay. We look forward to a prompt rehearing of our case to overturn these unlawful cuts.”

In their lawsuit, the AHA, AAMC, and several member hospitals argue that HHS exceeded its statutory authority when it implemented a two-year phase-in of site-neutral payments in the outpatient prospective payment system (OPPS) final rules for 2019 and 2020.

The appeals court, however, determined that HHS has the ability to “develop a method for controlling unnecessary increases in the volume of covered [outpatient] services,” even in a non-budget-neutral manner.

The court overturned a lower court’s ruling in favor of the hospitals and gave the green light to HHS to implement the reduced reimbursement rates as a way to reduce steadily rising hospital outpatient volumes, which the department has deemed “unnecessary.”

Total Medicare spending on hospital outpatient services was growing at a rate of roughly 8 percent per year under the OPPS, and was expected to further increase by more than $5 billion through 2019, CMS reported in the OPPS final rule for 2019.

The ruling was a blow to the industry groups and member hospitals, which argued that the rate of growth in hospital outpatient services was not a product of higher OPPS rates (versus Physician Fee Schedule rates), but of an increasing Medicare-eligible population and the ability of providers to safely deliver more services in the outpatient setting.

The groups also contended that HHS did not have the authority to implement the reimbursement cuts since it would expand site-neutral payments to more off-campus provider-based departments, including those protected from reduced reimbursement rates by the Bipartisan Budget Act of 2015.

Section 603 of the law carved out exceptions to any hospital site-neutral payments policy by allowing off-campus provider-based departments built prior to November 2, 2015, to receive the higher Medicare reimbursement rate for services.

But the OPPS final rule for 2019 pushed forward site-neutral payments for all off-campus provider-based departments for clinic visits, slashing rates by 30 percent in 2019 and by 40 percent after that.

AHA and AAMC intend for the rehearing to shine another light on this argument, which led to a lower court reversing the reimbursement cuts last year.

“The appeals court declined to strictly construe the statutory authority that binds the agency, unaccountably deferring to impermissible agency decisions,” the groups said in the announcement.

But independent providers are hoping the court holds strong.

The court’s decision to uphold the site-neutral payment policy was “a big win for independent practices that provide services to Medicare patients to level the playing field,” according to LUGPA, the Large Urology Group Practice Association.

Reimbursement rates based on site of service have led hospitals to increasingly acquire physician practices, leading to increased industry consolidation and therefore healthcare costs.

Hospitals acquired approximately 13,000 physician practices between July 2015 and July 2018, adding to the 128 percent increase in hospital acquisitions of practices from 2012 to 2018, Avalere reported last year.

“Payment disparities across different sites of service create unjustified financial stress on patients, community-based physicians and the Medicare program,” Gary L. LeRoy, MD, president of the American Academy of Family Physicians (AAFP), said in a statement.

The cost of services should, instead, be the same regardless of where patients choose to receive care, LeRoy stated.

Like their hospital counterparts, AAFP, LUGPA, and other physician associations will not back down from their site-neutral payment advocacy efforts, like the Alliance for Site Neutral Payment and Consumers First.

“With our members’ support, we will continue to fight for the rights of independent physicians,” said Richard Harris, MD, LUGPA president.