Two of the nation's largest healthcare groups are suing the Trump Administration over a final rule to institute site-neutral payments for clinic visits, saying the policy would hurt patients.
Last month, the Centers for Medicare and Medicaid Services (CMS) finalized the 2019 Outpatient Prospective Payment System (OPPS) rule (PDF), which will gradually institute site-neutral payments in the Medicare program over the next two years. Agency officials said site-neutral payments for clinic visits will lower out-of-pocket costs for beneficiaries and save the program as much as $380 million in 2019.
In a complaint filed in the U.S. District Court for the District of Columbia, the American Hosptial Association (AHA) and the Association of American Medical Colleges (AAMC) said the rule would lead to access problems as hospitals cut services, hurting vulnerable patients and claimed the administration is overstepping its legal bounds. The associations were joined in the legal action by Olympic Medical Center in Port Angeles, Wash., Mercy Health in Muskegon, Mich., and York Hospital in York, Maine.
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"These cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the real and crucial differences between them and other sites of care,” said Rick Pollack, president and CEO of the AHA in a statement.
AHA said it was planning legal action shortly after the rule was finalized.
Physician groups, including the American Association of Family Physicians (AAFP) and the American College of Physicians (ACP) as well as groups like the Cancer Oncology Alliance, have supported site-neutral payments for some time. AAFP has said site-neutral payments can also help community clinics stay open at a time many have had to close due to vertical integration, consequently advancing patient choice and reducing costs.
But hospital groups oppose the rule, which also expands a CMS policy limiting how much drug companies can charge hospitals for their products in the 340B program.
“Patients who receive care in a hospital outpatient department are more likely to be poorer and have more severe chronic conditions than patients treated in an independent physician office," Pollack said. "In addition, only hospitals provide 24/7 access to care for patients, regardless of their ability to pay, hospitals are held to far higher regulatory requirements, and hospital outpatient departments in inner cities and rural areas are often the only sites of care that provide the services they do.”
Most recently, AHA had sued CMS over the 340B program changes before HHS bumped up the implementation date last month for changes that would set price ceilings and add civil monetary penalties for manufacturers—two changes the AHA supported.
See a copy of the lawsuit below.
Mercy Health Muskegon, Clallam County Public Hospital District No. 2, d/b/a Olympic Medical
Center, and York Hospital bring this Complaint against Defendant Alex M. Azar II, in his
official capacity as Secretary of Health and Human Services (HHS), and allege as follows:
1. This is an action to challenge certain aspects of a final rule issued by the Centers
for Medicare & Medicaid Services (CMS), an agency within HHS, published in the Federal
Register on November 21. See Centers for Medicare & Medicaid Services, Medicare Program:
Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment
Systems and Quality Reporting Programs, Dep’t of Health and Human Servs., 83 Fed. Reg.
58,818 (Nov. 21, 2018) (Final Rule). The Final Rule, in relevant part, makes serious reductions
to Medicare payment rates for certain clinic visit services provided at specified off-campus
hospital provider-based departments (off-campus PBDs), commencing on January 1, 2019. Off- campus PBDs are practice locations of a hospital that are not located in immediate proximity to
the main building of their affiliated hospital, but are nonetheless so closely integrated with and
controlled by the main hospital as to be considered a part of the hospital.
2. In the Medicare statute, Congress has laid out a clear distinction between
“excepted” off-campus PBDs, which meet specified grandfathering requirements, and “non- excepted” off-campus PBDs, which do not. The statute makes clear that services provided at
excepted and non-excepted off-campus PBDs should be paid pursuant to different payment
systems. 42 U.S.C. § 1395l(t)(21)(C). And yet the Final Rule effectively abolishes any
distinction between excepted and non-excepted entities by subjecting them both to the same
payment system and rate. That violates the clear intent of Congress and therefore is ultra vires.
to payments for covered hospital outpatient services under Medicare. 42 U.S.C.
§ 1395l(t)(9)(A). Changes to payments that target only specific items or services must be budget
neutral. 42 U.S.C. § 1395l(t)(9)(B). And yet in an unprecedented assertion of the agency’s
authority, the Final Rule purports to do precisely what Congress has expressly prohibited: CMS
seeks to reduce total payments for covered hospital outpatient services for calendar year (CY)
2019 by hundreds of millions of dollars by targeting a select group of services for non-budget- neutral payment adjustments. CMS cannot exercise its limited authority in a manner so
flagrantly inconsistent with the Medicare statute. That, too, is textbook ultra vires action.
4. This Court should reject CMS’s attempts to replace Congress’s unequivocal
directives with the agency’s own policy preferences. CMS may not contravene clear
congressional mandates merely because the agency wishes to make cuts to Medicare spending.
5. Plaintiff the American Hospital Association (AHA) is a national, not-for-profit
organization headquartered in Washington, D.C. The AHA represents and serves nearly 5,000
hospitals, health care systems, and networks, plus 43,000 individual members. Its mission is to
advance the health of individuals and communities by leading, representing, and serving the
hospitals, systems, and other related organizations that are accountable to the community and
committed to health improvement. The AHA provides extensive education for health care
leaders and is a source of valuable information and data on health care issues and trends. It also
ensures that members’ perspectives and needs are heard and addressed in national health-policy
development, legislative and regulatory debates, and judicial matters. The AHA has a principal
place of business located at 800 Tenth Street, N.W., Suite 400, Washington, D.C. 20001.
accredited U.S. medical schools, nearly 400 major teaching hospitals and health systems, and
more than 80 academic societies. Through these institutions and organizations, the AAMC
represents 128,000 faculty members, 83,000 medical students, and 110,000 resident physicians.
The AAMC works to improve the nation’s health by strengthening the quality of medical
education and training, enhancing the search for biomedical knowledge, advancing health
services research, and integrating education and research into the provision of effective health
care. In addition, it is one of the AAMC’s core missions to advocate on behalf of its members
and patients in connection with national health-policy matters. The AAMC has a principal place
of business located at 655 K Street, N.W., Suite 100, Washington, D.C. 20001.
7. Plaintiff Mercy Health Muskegon is a Catholic nonprofit hospital that serves the
greater Muskegon, Michigan area and surrounding communities. Mercy Health Muskegon
operates 27 off-campus PBDs, 25 of which are excepted PBDs. These include a sleep center, a
comprehensive breast high-risk clinic, specialty clinics (including neurosurgery, cardiology,
geriatrics, and gastroenterology), and a number of primary care facilities capable of providing x- ray, laboratory, and pharmacy services in the same building. Mercy Health Muskegon furnishes
outpatient services at these excepted off-campus PBDs and will suffer immediate and concrete
harm from the outpatient service payment reductions set forth in the Final Rule. Mercy Health
Muskegon has its principal place of business at 1500 E. Sherman Boulevard, Muskegon,
8. Plaintiff Clallam County Public Hospital District No. 2, d/b/a Olympic Medical
Center (Olympic Medical) is a comprehensive health care provider serving the North Olympic
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