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AAMC Wins Lawsuit Challenging Medicare Cuts to Certain Outpatient Departments

September 20, 2019

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PRESS CONTACTS
Ivy Baer, Senior Director and Regulatory Counsel

Judge Rosemary Collyer of the U.S. District Court for the District of Columbia issued a ruling Sept. 17 that the Centers for Medicare and Medicaid Services (CMS) exceeded its statutory authority when it finalized the calendar year (CY) 2019 Outpatient Prospective Payment (OPPS) rule that cut payments for evaluation and management (E&M) services provided at off-campus provider-based departments, and ordered CMS to vacate the rule. No remedy was ordered. The decision was in a response to a lawsuit filed by the AAMC, the American Hospital Association (AHA), and others [see Washington Highlights, Dec. 7, 2018]. In response to the ruling, AAMC and AHA issued a joint statement.

The AAMC and numerous other stakeholders objected to the proposed cuts in a comment letter submitted in response to the CY19 OPPS proposed rule [see Washington Highlights, Sept. 28, 2018]. Nonetheless, in the final rule, CMS cut payments to outpatient provider-based departments that had been grandfathered into the OPPS payment system [see Washington Highlights, Nov. 9, 2018]. In taking this action, CMS did not make the cuts budget neutral which resulted in overall cuts to OPPS. CMS claimed authority for these cuts due to “unnecessary increases in the volume of outpatient services.” The agency also claimed that the reason for the growth of E&M services in these off-campus provider-based departments was because they received a higher payment rate.

The court rejected CMS’s arguments. First, the court concluded that if CMS were to make such cuts, it would have to use a methodology that was established by Congress and therefore would have to be budget neutral. The court found that “Congress has developed a multi-factored, complicated annual process whereby CMS is to pre-set relative payments for OPD [outpatient department] services. This annual process would be totally ignored and circumvented if CMS could unilaterally set OPD service-specific rates without regard to their relative position or budget neutrality.”

The court vacated the portion of the rule related to the cuts and sent it back to CMS, noting the “Final Rule is less than one year old and did not apply budget neutrality principles. These burdens should lessen the burden [on CMS] on reconsideration.” The court ordered both parties provide a joint status report by Oct. 1 to determine if additional briefing on the remedy is appropriate.

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