CMS’s Site-Neutrality Rule Struck Down

A U.S. District Court has invalidated a Centers for Medicare and Medicaid Services (CMS) regulation issued last November that treated payments made to hospital outpatient departments the same as those made to physician offices.
CMS’s final outpatient prospective payment system rule (OPPS) issued in November 2018 instituted the “site-neutral” payment policy for physician services. CMS argued that Medicare payments for such provider-based departments (PBDs) – for example, oncology clinics, urgent care clinics, or medical offices offering specialized care – should be paid the same relatively lower rate as care provided in a doctor’s office.
The American Hospital Association brought suit, arguing that PBDs have higher costs because they deliver more functions than standalone M.D. offices; they have to satisfy more stringent Medicare licensing and operation requirements similar to those that hospitals must follow; and that outpatient clinics usually serve sicker and poorer patients than physician offices. Hospitals also argued that more and more care is moving from inpatient settings to outpatient (in part to reduce overall healthcare costs), but that the outpatient care is still integrated with the entire hospital complex (which, nonetheless, has costs and overhead).
But aside from the caregiving and payment arguments, AHA argued that CMS exceeded its rulemaking authority, which is the factor on which the U.S. District Court based its opinion.