Appeals court delivers win for HHS' site-neutral payment policy

Angie Stewart - Print  |

The U.S. Court of Appeals ruled July 17 that HHS was within its rights to reduce payments to hospital outpatient departments, reversing a district court's earlier decision. 

The case centered on HHS' decision that the Medicare payment differential between hospital outpatient facilities and independent physician practices "gave rise to economic incentive that induced unnecessary growth in the volume of outpatient care" provided at hospital outpatient sites. 

The agency therefore reduced the rate it paid hospitals for patient evaluation and management so it was equal to the rate physician practices received for that service. A group of hospitals claimed this rate reduction fell outside of HHS' statutory authority, and a district court agreed. 

The district court's ruling would have discouraged medical procedures from being performed by independent practices at lower costs to patients. The latest ruling by a panel of appellate judges, however, clears the way for HHS' site-neutral payment policy to move forward.

In January, three industry organizations filed a brief of amici curiae with the Clerk of Court for the U.S. Court of Appeals for the District of Columbia Circuit. 

Written by Digestive Health Physicians Association, Large Urology Group Practice Association and The OrthoForum, the brief stated HHS Secretary Alex Azar "acted within his discretion — and he certainly did not commit an 'obvious violation of a clear statutory command,'" as hospital groups had claimed, "when he imposed a rate cap as a 'method for controlling unnecessary increases in the volume' of clinic visit services."

The trade associations represent about 350 independent physician practices comprising nearly 8,000 physicians specializing in gastroenterology, urology, orthopedic surgery, pathology and radiation oncology. Click here to read the full brief from these groups.

Richard Harris, MD, the president of LUGPA, an organization advocating on behalf of independent physicians, shared the following statement on the appelate court's decision:

"For too long, independent physicians were forced to stand up to the consolidation and market monopolization of large healthcare systems aided by an unfair reimbursement system that paid hospital outpatient departments as much as twice for the same service as independent physicians. With today's decision, the DC Circuit has supported CMS' authority to adjust payments under the OPPS system in response to perceived reimbursement dynamics that unnecessarily increase volume of service."

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