A Win for Hospitals and Patients Alike. Federal Judge Vacates Medicare Site Neutral Payment Rule for Grandfathered Off-Campus Hospital Outpatient Departments

A federal judge has vacated the Centers for Medicare & Medicaid Services’ (“CMS”) site neutral payment rule for clinic visits at excepted (i.e., “grandfathered”) off-campus hospital outpatient departments (“HOPDs”).  Because clinic visits are one of the most commonly billed outpatient services, this ruling could have a significant positive financial impact on hospitals.

The site neutral rule was implemented as part of CMS’ 2019 Outpatient Prospective Payment System (“OPPS”) Final Rule.  In part, the 2019 OPPS Final Rule extended site neutral reimbursement to clinic visits (G0463) performed at grandfathered off-campus HOPDs.  Effective January 1, 2019, clinic visits at these locations were paid 70% of the OPPS rate, with a further reduction to 40% of the OPPS rate scheduled for 2020 and beyond.

The American Hospital Association (“AMA”) and other healthcare organizations challenged CMS’ extension of site neutral reimbursement to grandfathered off-campus HOPDs.  Ruling in favor of the AMA, et al., the court held that “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.”  The court remanded the matter to CMS for consideration of remedial measures.  The parties are required to submit a joint status report to the court by October 1, 2019 to determine if additional briefing on remedies is required.

This is a welcome ruling for hospitals and, for the time being, strengthens the financial viability of grandfathered off-campus HOPDs.  Advis will continue to monitor developments in this case, particularly as it relates to payment of amounts owed to hospitals to account for the inappropriate site neutral reimbursement reduction from January 1, 2019 to now.

For any questions regarding this ruling, or for any other healthcare or operational matters, please contact Advis at (708) 478-7030.