On January 18, 2019, a group of nearly 40 hospitals filed a lawsuit in the United States District Court for the District of Columbia challenging CMS’s rate cut to evaluation and management (E/M) services furnished by excepted off-campus provider-based departments (PBDs). The rate cut, effective January 1, 2019, is forecasted to reduce Medicare payments for hospital outpatient department services by $300 million in 2019 alone—and even more in future years when the E/M rate cut is fully implemented. The hospitals allege that the rate cut exceeds CMS’s authority and unlawfully violates the express will of Congress, which specifically excepted certain off-campus PBDs from such rate reductions.
Off-campus PBDs that existed prior to November 2, 2015, were specifically “excepted” by Congress from Section 603 of the Bipartisan Budget Act of 2015 (BBA 2015), which attempted to equalize payment rates for services,regardless of whether they are provided in a physician’s office or in a hospital department that is located away from or “off” the main campus of the hospital. Excepted PBDs continue to be paid at the higher Outpatient Prospective Payment System (OPPS) rate. Nevertheless, CMS issued a rate cut—promulgated in the 2019 OPPS Final Rule—that set payments for E/M services provided in excepted PBDs at the lower rate.
The hospitals argue 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 argue 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 so. Numerous comment letters in response to CMS’s initial proposal stated that the rate cut is expected to have a detrimental impact on the ability of off-campus PBDs to continue providing a full range of services that are not typically offered by physician offices but are needed in the community.
The hospitals are represented by King & Spalding partners Mark Polston, Christopher Kenny, and Nikesh Jindal. The complaint is available here.
