Judge tosses CMS' site-neutral pay policy

Susannah Luthi  September 17, 2019

A federal judge on Tuesday overturned the CMS rule that cut Medicare payments for some hospital clinic visits, siding with hospitals who sued to prevent the changes.

U.S. District Judge Rosemary Collyer in Washington ruled that the Trump administration had exceeded its authority when it expanded the so-called site-neutral pay policy to evaluation and management services at off-campus hospital clinics. The goal was for Medicare to pay the same rate to hospitals as to independent physicians.

In her ruling Judge Collyer said the CMS rule, in effect since Jan. 1, didn't qualify as a method for controlling unnecessary spikes in hospital use as the government had argued.

The CMS argument "does not make it clear what a 'method' is, but it does make clear what a 'method' is not: it is not a price-setting tool, and the government's effort to wield it in such a manner is manifestly inconsistent with the statutory scheme," Judge Collyer said.

She added that the government can't "shoehorn a 'method' into the multi-faceted congressional payment scheme when Congress' clear directions lack any such reference."

The decision is a big win for hospitals, who in their original complaint led by the American Hospital Association projected cuts of about $380 million this year and $760 million in 2020.

The court was clear that if the government wants to change the way Medicare pays for office visits, it has to be done in a way that doesn't increase or decrease Medicare spending.

"Nothing in the adjustment or payment scheme permits service-specific, non-budget-neutral cuts," Judge Collyer wrote.

She also disagreed with the government's argument that, because Congress didn't explicitly require the CMS to keep its adjustments of these Medicare payments budget-neutral, the site-neutral regulation followed the intent of the law.

"Given how pervasively the statute requires budget neutrality in the Outpatient Prospective Payment System, Congress clearly considered effects on total expenditures critical to that system," the judge wrote.

Judge Collyer did not order the CMS to pay hospitals what the agency had withheld under the proposed rule, as the hospital plaintiffs had asked.

Instead, she asked for a joint status report from the hospitals and agency so she can evaluate whether she needs additional briefing to decide on a remedy. That report is due Oct. 1.

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