Good News and Bad for Hospitals on Outpatient Payments

A federal court has provided relief to hospitals that saw reduced Medicare payments for some outpatient services in 2019.

But that relief is only partial.

In response to a suit filed by several hospital groups, a federal court ruled that the Centers for Medicare & Medicaid services had illegally reduced Medicare payments for services provided in some hospital off-campus outpatient departments beginning on January 1, 2019 and ordered the federal government to repay the hospitals for the Medicare revenue they lost.  The reduced payments were part of a new Medicare site-neutral payment policy for outpatient services, and CMS has announced a plan for reimbursing affected hospitals for their losses.

At the same time, however, CMS announced that despite the court’s ruling, it will implement the same policy of reduced payments for outpatient care provided in some hospitals’ off-campus outpatient departments in 2020, and an effort by hospitals to persuade the court to ban this payment reduction was rejected by the same court that ruled against CMS on the 2019 payments.

Learn more about the ruling that CMS must reimburse  hospitals for lost payments in the Healthcare Dive article “Hospital group cheers CMS move to pay back outpatient payment cuts.”  Learn about the court decision not to impose the same decision on 2020 payments in the Fierce Healthcare article “Judge strikes down AHA’s bid to halt CMS’ site-neutral payment cuts for 2020.”

Court Halts Medicare Site-Neutral Payment Changes

The Centers for Medicare & Medicaid Services did not have the authority to implement the site-neutral payment system for Medicare-covered outpatient services that it introduced last year, a federal court has concluded.

According to the court, CMS exceeded its authority because it

…was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payment rates only for certain services provided by certain providers.

In general, hospitals oppose the movement toward site-neutral payments and independent physician groups support it.

The court did not order CMS to reimburse affected physician practices for lost revenue.  Instead, it directed CMS to develop an appropriate remedy.

CMS is likely to appeal the ruling.

Meanwhile, CMS has proposed continuing its phase-in of the site-neutral payment policy in its proposed 2020 outpatient prospective payment system regulation that will take effect on January 1, 2020.  It is not clear how or if – the court ruling might affect CMS’s decision to move ahead with this proposal.

NASH opposed the 2019 change in a formal regulatory comment letter to CMS last year (see pages 2 and 3) on behalf of private safety-net hospitals and next week will submit another comment letter expressing the same view about year two of the proposed changes in Medicare outpatient payment policy.

Learn more about the case, the court decision, and what might happen next in the Healthcare Dive article “Hospitals score victory as judge tosses CMS site neutral rule.”


New Reg Pushes Medicare Toward Site-Neutral Outpatient Payments

Medicare would make more payments for outpatient services on a site-neutral basis under a newly proposed regulation just released by the Centers for Medicare & Medicaid Services.

The 2019 Medicare outpatient prospective payment system regulation, published in proposal form, calls for:

  • paying physician fee schedule rates rather than hospital outpatient rates at excepted off-campus provider-based departments;
  • slashing payments for office visits;
  • extending this year’s 340B prescription drug discount payments, already cut nearly 30 percent this year, to additional providers; and
  • raising ambulatory surgical center rates and expanding the list of procedures that can be performed in such facilities so they can compete with hospitals for outpatient services.

The proposed regulation also calls for reducing quality reporting requirements and giving providers financial incentives to prescribe non-opioid pain medicine for surgery patients.

The regulation, which would affect provider payments beginning on January 1, 2019, was published in proposed form and will be finalized later in the year.  Stakeholders have until September 24 to submit comments to CMS.  For further information about what CMS has proposed, see this CMS fact sheet outlining the proposed regulation and the 761-page proposed regulation itself.

CMS Fills in the Blanks on Site-Neutral Payments

When Congress passed a budget bill last fall calling for the introduction of site-neutral payments for Medicare-covered outpatient services, hospitals wondered how this might affect their current provider-based outpatient facilities and their plans for future facilities or acquisitions.

Now they have some answers.

cmsLast week the Centers for Medicare & Medicaid Services put regulatory flesh on the bones outlined by Congress in a 764-page proposed regulation that addresses what hospital-based outpatient facilities and services will be covered by the site-neutral payment rule and which will not.

Interested parties have until September 6 to submit formal comments to CMS about the proposed regulation; NAUH currently plans to do so.

Learn more about the proposed guidelines, which are subject to stakeholder review and comment, in this CMS fact sheet and the proposed regulation itself.

CMS Proposes FY 2017 Outpatient Payments

The Centers for Medicare & Medicaid Services has revealed how it proposes paying hospitals for Medicare-covered outpatient services in 2017.

Among other matters, the 764-page proposed regulation addresses:

  • proposed rate increases for outpatient and ambulatory surgery center services;
  • new site-neutral outpatient payment policies;
  • changes in the value-based purchasing program;
  • changes in hospital outpatient quality reporting requirements;
  • electronic health record policies; and
  • changes in ambulatory surgical center quality reporting requirements.

law booksNAUH members have received a detailed memo describing the proposed policies.  Representatives of other private safety-net hospitals may request a copy of that memo by clicking on the “contact us” link at the top of this screen.

Interested parties have until September 6 to submit written comments to CMS. The final rule will be published later this year and take effect on January 1, 2017. To learn more about what CMS has proposed for Medicare outpatient payments go here to see a CMS fact sheet and here to see the proposed regulation itself.



Medicare Cuts May be Part of Budget Deal

The agreement between the White House and congressional negotiators on a two-year budget deal and an increase in the federal debt ceiling will be paid for in part with reductions in Medicare payments.

US Capitol DomeUnder the reported agreement, negotiators agreed to increase federal spending $80 billion over two years, and that increase will almost certainly need to be offset by spending cuts. The New York Times has reported that “The Medicare savings would come from cuts in payments to doctors and other health care providers.”

The budget agreement reportedly did not include specific spending cuts beyond extension of the current two percent Medicare sequestration cuts, although the publication The Hill reports that site-neutral Medicare outpatient payments may be part of the agreement; the additional cuts will need to be negotiated within Congress.

The National Association of Urban Hospitals has long opposed the introduction of site-neutral Medicare outpatient payments and wrote this week to members of Congress urging them not to reduce Medicare payments to hospitals to offset budget agreement spending increases.

To learn more about the budget agreement and its possible implications for health care providers, see this New York Times article and this report from The Hill.

OIG Reiterates Medicare, Medicaid Recommendations

Every year the U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) examines the operations of various department offices, programs, and policies and offers recommendations for changes and improvements. Some of those recommendations are adopted and others are not.

The OIG annually publishes a document reiterating what it believes to be its most important and potentially useful recommendations that were not adopted, and that publication was just released.

hhsOIGAmong the Medicare and Medicaid recommendations it has presented again are:

  • Establish accurate and reasonable Medicare payment rates for hospital inpatient services.
  • Establish accurate and reasonable Medicare payment rates for hospital transfers.
  • Reduce hospital outpatient department payment rates for ambulatory surgical center-approved procedures.
  • Prevent inappropriate payments to Medicare home health agencies.
  • Reduce inappropriate payments to skilled nursing facilities.
  • Prevent payments for ineligible Medicare beneficiaries.
  • Reconcile Medicare outlier payments in accordance with federal guidance and regulations.
  • Ensure that states calculate accurate costs for Medicaid services provided by local providers.
  • Ensure the collection of identified Medicare overpayments.
  • Improve oversight of management of Medicaid personal services.
  • Improve the Medicare appeals process at the administrative law judge level.
  • Enhance efforts to identify adverse events to ensure quality of care and safety.
  • Ensure that Medicare children receive all required preventive screening services.
  • Strengthen oversight of state access standards for Medicaid managed care.

In its Compendium of Unimplemented Recommendations/March 2015, the OIG presents the issues and its rationale for its recommendation and describes the status of implementation, including, in some cases, why CMS has chosen not to implement its recommendations.

Find the report here.

OIG Recommends Site-Neutral Payments for Some Medicare Outpatient Surgery

The Centers for Medicare & Medicaid Services’ (CMS) Office of the Inspector General (OIG) has recommended that Medicare introduce site-neutral payments for low-risk and no-risk surgical procedures that could be performed in ambulatory surgical centers instead of hospital outpatient facilities.

hhsOIGBy lowering Medicare payments for procedures that could be performed in ambulatory surgical centers instead of more costly hospital outpatient departments, Medicare could save $15 billion from 2012 through 2017 while beneficiaries could save another $3 billion in cost-sharing payments, the report concluded.

Medicare rejected the recommendation in part because it did not include clinical criteria for determining which surgical procedures would be subject to such an approach.

Read a summary of the OIG report and find a link to the complete report here, on the OIG’s web site.  The report includes CMS’s response.

MedPAC Endorses Site-Neutral Payments

MedPAC has recommended to Congress that Medicare equalize the rates paid to hospital outpatient departments and private physicians’ offices for many outpatient services.

medpac-logo.Par.0001.ImageCurrently, hospital outpatient departments are paid more than physician offices for many Medicare-covered services.

MedPAC, which advises Congress on Medicare payment issues, called for reducing or eliminating current fee differentials.

While MedPAC’s recommendations are not binding, those recommendations frequently form the basis for future Medicare policies.

Learn more about this and other MedPAC recommendations in this Becker’s Hospital Review article.