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The Centers for Medicare & Medicaid Services Orders Hospital Payments Regarding Invalid 2019 Site-Neutral Policy

February 2020

Effective for the period of January 1 through December 31, 2019, the Centers for Medicare & Medicaid Services (CMS) adopted a “site-neutral” payment policy for services furnished in provider-based off-campus clinics paid under the Medicare outpatient prospective payment system (OPPS).  Previously, OPPS paid a greater payment to off-campus clinics than it paid for the equivalent services furnished by a physician practice.  Under the site-neutral policy CMS paid hospital outpatient departments at the physician fee schedule equivalent rate for clinic visit services.  CMS stated that the purpose of the site-neutral payments was to lower costs for the most commonly billed service under the OPPS. 

The American Hospital Association (AHA) and a number of hospitals nationwide, including clients of Honigman, challenged the 2019 site-neutral policy.  As a result of a favorable decision in the AHA litigation, on December 12, 2019, CMS issued the following statement:  

The American Hospital Association challenged CMS’s use of its authority under Subsection (t)(2)(F) of the Medicare statute to pay for certain outpatient clinic visit services provided at excepted off-campus Provider-Based Departments (PBDs) at the same rate that CMS uses to pay non-excepted off-campus PBDs for those services under the separate Physician Fee Schedule as finalized with Final Rule, Medicare Program: Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting, 83 Fed. Reg. 58,818 (Nov. 21, 2018) (Rule).

The United States District Court for the District of Columbia issued instructions for CMS to immediately cease the clinic visit provided at excepted off-campus PBDs payment reduction for CY 2019 implemented with final Rule, Medicare Program: Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting, 83 Fed. Reg. 58,818 (Nov. 21, 2018) (Rule).

CMS installed a revised Hospital Outpatient Prospective Payment System Pricer to update the rates being applied to claim lines. The revised Pricer went into production on November 4, 2019, and applies to claims with a line item date of service of January 1, 2019, and after. Starting January 1, 2020, and over the next few months, the Medicare Administrative Contactors will automatically reprocess claims paid at the reduced rate; no provider action needed. 

Accordingly, hospitals should expect to receive additional payments for services furnished during 2019 at off-campus facilities.  

CMS has appealed to the United States Court of Appeals for the District of Columbia. Thus, a final judicial decision has not yet been issued regarding the 2019 site- neutral policy.  Further, CMS has adopted the identical site-neutral policy for 2020, which has been challenged in one or more suits.  Until the litigation is concluded, hospitals will not know with certainty what their payment will be for 2019 and subsequent year.