Hospitals sue HHS over OPPS policy that will reduce payments to grandfathered off-campus, provider-based departments

Thirty-eight hospitals filed a lawsuit against the U.S. Department of Health and Human Services (HHS) on January 18, alleging that that HHS Secretary Alex Azar overstepped his authority when he finalized an OPPS policy that cuts Medicare payment rates to off-campus, provider-based departments (PBD).

Under the 2019 OPPS final rule, the site-neutral payment policy reduces payment rates for services described by HCPCS code G0463 (hospital outpatient clinic visit for assessment and management of a patient)at grandfathered off-campus PBD. In 2019, that amount is effectively equal to 70% of the OPPS rate, while it would equal 40% of that rate in 2020 and beyond. HHS has previously been sued by the American Hospital Association, Association of American Medical Colleges, and other hospitals due to this provision.

CMS is implementing the payment reduction over a two-year period, applying half of the total reduction in 2019. The site-neutral policy will reduce Medicare payments to PBDs by $380 million in 2019 and $760 million in 2020, according to the suit.

In their lawsuit, the hospitals claim that the site-neutral payment policy violates Section 603 of the Bipartisan Budget Act of 2015, which requires that Medicare pay the same rates for medical services whether they're provided in a physician's office or a hospital department located off the hospital's main campus. The hospitals also argue that the policy goes against a congressional directive that PBDs established before November 2, 2015, be reimbursed at OPPS rates.

Services provided in PBDs are costlier and more resource-intensive to provide than in physician offices, according to the lawsuit. PBDs provide a wider range of services and adhere to stricter regulatory requirements than independent physician offices. Therefore, instituting payment cuts could have a significant negative impact on the patients who seek care at these facilities, the lawsuit argues.