Following the implementation of Medicare outpatient PPS, a number of
providers challenged CMS's continuation of payment using a blended rate
methodology for outpatient hospital services between January 1, 1999 and
August 1, 2000, when outpatient PPS went into effect. By statute, outpatient
PPS was to have become effective January 1, 1999. Due to Y2K issues,
however, CMS decided not to implement the statute at that time and, instead,
elected to postpone the effective date for approximately a year and a half.
During the interim period, CMS continued to pay hospitals for outpatient
services based on the existing blended rate methodology. The providers
argued that the statute gave CMS no authority to extend the blended rate
methodology beyond January 1, 1999, and that CMS should have paid for the
services on the basis of reasonable cost from then until August 2000. Ober|Kaler's Thomas W. Coons discusses two
recent judicial decisions that have rejected those arguments.
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