Coker Connection Newsletter
Another Blow for Hospitals: The Ongoing Battle of Site Neutral Payments
- July 30, 2020
Hospitals have historically benefited from the Outpatient Prospective Payment System (OPPS), the reimbursement mechanism for Hospital Outpatient Departments (HOPDs) facility fees, in comparison to their private practice peers. The latter functioned under the Medicare Physician Fee Schedule (PFS).
Procedures performed in a freestanding clinic versus an HOPD received 75% less reimbursement.
Hospitals were highly incentivized to acquire independent sites, switch the designation to HOPD and begin increasing their reimbursement for the same procedures. As a result, HOPD billings effectively doubled over the last decade. Thus, both Medicare and its beneficiaries were under pressure to find a solution.
In 2017, the Centers for Medicare & Medicaid Services (CMS) updated OPPS to reduce payments for “non-excepted” HOPDs to 40% of the OPPS rate. Excepted HOPDs are any off-campus provider-based sites that began billing under the OPPS on or before November 2, 2015, or facilities that actively had plans in place.
In 2019, CMS updated the OPPS again, stating that in 2019 it would start paying HOPDs a PFS-equivalent rate for clinic visit services (G0463), phased in over two years.
CMS found support in the Medicare Payment Advisory Committee (MedPAC) and the American Medical Association (AMA), which were both long-term critics of the payment difference of OPPS. CMS focused on the rate of growth for OPPS (approximately 8% per year), which suggests that the payment incentives, rather than patient acuity or medical necessity, were affecting the choice of site-of-service.
CMS projected that site neutral payments would reduce Medicare spending by over $300 million in 2019 for these routine visits. Additionally, Medicare beneficiaries would pay $7 less in copayments for clinic visits at the off-campus provider-based departments.
CMS Credo: Competition in healthcare should be based on the quality of care versus the location of care. Site neutral payments will give patients more options for their care.
Alternatively, hospitals predicted a massive loss under the site neutral payments, likely to be in the millions for many organizations. The American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), and various other private groups took up arms against CMS. They argued hospitals should receive additional reimbursement as it is inherently more expensive to run HOPDs based on the standards they are required to uphold. Thus, hospitals contend that this will negatively impact care quality and create issues in achieving value-based care.
Provider Organization Credo: Hospitals must be paid for the additional operating costs that are intrinsic to its structure; thus, site neutral payments are completely impractical and will result in the loss of services to specific patients and communities.
The Battle of 2019
In September 2019, the AHA and the AAMC filed an opinion to halt the policy. U.S. District Judge Rosemary M. Collyer ruled against the policy, stating CMS could not reduce rates for certain hospital outpatient services in a non-budget-neutral manner. CMS agreed to repay 2019 reimbursements affected under the 2019 policy. Explicitly, the ruling “affirmed that cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care.”
In December 2019, the AHA filed a second opinion arguing against the 2020 OPPS Rule (which included the site neutral payment adjustment). Judge Collyer denied this request, stating her previous decision did not speak to the 2020 proposed cuts, only the 2019 payments.
Hospitals will, therefore, receive the reduced reimbursement in 2020 and will then be required to file their complaint again; however, she stated CMS continuing with the policy “calls its argument into serious question and appears to set the agency above the law.”
CMS appealed Collyer’s original decision.
The Battle of 2020 (AHA vs. Azar)
In July 2020, the U.S. Court of Appeals for the District of Columbia ruled unanimously in favor of CMS, reversing Judge Collyer’s ruling last September. The Trump administration maintains that CMS has the authority to impose payment cuts as a way to reduce unnecessary and costly increases to hospital procedures.
Hospital groups continue to argue that CMS acted unlawfully and against the intent of Congress and have asked the federal appeals court to reconsider its ruling.
Amidst a chaotic 2020, AHA vs. Azar deals another blow to hospitals that are still being ravaged by the COVID-19 pandemic. Hospitals argue that these budget cuts will continue to impact the most hard-hit organizations and communities negatively. With the battle lost, the hospitals hope to win the war and will continue to fight another day, asserting site neutral payments would be inherently fatal.
Strong performance in any healthcare organization starts with a well-crafted strategy. At Coker, we understand the challenges facing hospitals, health systems, and physician groups in today’s healthcare environment. Our team of professionals combines their broad experience and knowledge of current and future trends in healthcare to aid in all aspects of short- and long-term planning.