On Thursday, February 20, 2020, hospitals represented by King & Spalding that operate excepted off-campus provided-based outpatient departments (PBDs) filed their brief in federal appeals court to preserve the victory they achieved in federal district court last year. Last September, the district court vacated CMS’s 2019 payment rule that reduced payment for evaluation and management (E/M) services for excepted PBDs, finding that it violated the statutory requirement that payment adjustments be conducted in a budget-neutral manner. These hospitals are now asking the federal appeals court to affirm the district court’s decision in response to the government’s appeal. With the hospitals’ brief now filed, oral arguments are set for April 17, 2020.
Background
Section 603 of the Bipartisan Budget Act of 2015 (BBA 2015) attempted to equalize payment rates for outpatient services performed at newly-built PBDs, by requiring those services to be paid on the physician fee schedule regardless of whether they were provided in a physician’s office or in a hospital department that is located away from or “off” the main campus of the hospital. Off-campus PBDs that existed prior to the effective date of BBA 2015, November 2, 2015, however, were specifically “excepted,” and continued to be paid at the higher Outpatient Prospective Payment System (OPPS) rate. Despite Congress’ decision to protect payment rates for grandfathered PBDs, CMS promulgated a rule effective January 1, 2019, that declared that all off-campus PBDs, even those excepted under BBA 2015, would be paid the same rate as physicians’ offices for E/M services.
Legal Proceedings
The hospitals filed suit in federal district court alleging that CMS’s policy was unlawful, arguing that Congress was clear when it excepted off-campus PBDs and any attempt by CMS to circumvent Congress’s mandate expressed in Section 603 is beyond the legal authority of the agency. In addition, the hospitals argued that even if CMS had the authority to cut E/M rates, such an adjustment must be made in a budget-neutral manner, which CMS failed to do. In September 2019, the court agreed with the hospitals and vacated the payment rule, deciding narrowly that CMS failed to adhere to the budget-neutrality requirement. CMS appealed the court’s decision.
Now, hospitals are asking a federal appeals court to stand by the lower court’s decision. Specifically, the hospitals argue that the lower court got it right: payment cuts like the one here must be made in a budget-neutral manner. The hospitals also argue that CMS cannot circumvent the specific will of Congress in Section 603 of BBA 2015, which clearly excepted off-campus PBDs and allowed them to be paid at the full OPPS rate. Both the government and the hospitals have filed their briefs, and oral arguments are set for April 17, 2020.
Related Events
While CMS is asking the appeals court to reverse the lower court, it is also complying with the vacatur of its 2019 policy by reprocessing the affected 2019 claims to ensure hospitals receive the difference between the full OPPS rate and the reduced rate they received under the lower rate. And, it appears to be déjà vu all over again for 2020, as CMS has implemented another rate cut payment for these services in 2020, contending that the district court’s vacatur only applied to 2019 claims. The 2020 rate cut is based on the same flawed legal justification as the 2019 decision the court invalidated. King & Spalding’s plaintiffs have brought another challenge to that rate determination for the 2020 payment rule.
The hospitals’ brief is available here.
