This summer, the United States Court of Appeals for the District of Columbia reversed the United States District Court for the District of Columbia’s ruling in American Hospital Association (AHA) v. Azar, finding that the United States Department of Health and Human Services (HHS) properly exercised its authority in permitting the Centers for Medicare and Medicaid Services (CMS) to implement a service-specific, non-budget-neutral reimbursement cut under the Outpatient Prospective Payment System (OPPS).
Background
The way the OPPS system is set up, each year CMS sets the rates at which Medicare will reimburse hospitals for providing outpatient services under OPPS – the parameters of the system are statutorily set and any changes to OPPS must be budget neutral. However, even though the payment rate is controlled by OPPS, the quantity of services is not, meaning an increase in the services provided will result in an increase in Medicare expenditures. Because of that, Congress directed HHS in subparagraph (2)(F) of the OPPS statute, to “develop a method for controlling unnecessary increases in the volume of covered services.”
Typically, Congress has used Section 603 of the Bipartisan Budget Act of 2015 to address the issue of rising outpatient services being performed at hospital off-campus provider-based departments. That has helped to reduce the payment rates for services furnished at those locations that started/opened after the statute’s enactment, but did not alter the reimbursement rates for existing off-campus provider-based departments.
Then, in 2019, CMS proposed to exercise its authority and “develop a method for controlling” the increase, specifically proposing to cut reimbursement rates for evaluation and management services to all off-campus provider-based departments to the amount that CMS pays to freestanding physician offices who provide the same service. However, CMS wanted to implement the budget cut in a non-budget-neutral manner and indicated that it did not believe the budget-neutral requirement applied to methods for controlling volume. CMS then finalized the proposed rule and AHA filed suit.
Lower Court Ruling
In its decision, the lower court agreed with the AHA and set aside the regulation implementing the rate reduction, finding that the “method” developed by CMS “is impermissible and violates its obligations under the statute.”. In the decision, the Court emphasized that “Congress provided great detail in directing how CMS should develop and adjust relative payment weights…This extraordinarily detailed scheme results in a relative payment system which ensures that payments for one service are rationally connected to the payments for another and satisfies specific policies considered by Congress. And so that this system retains its integrity, CMS is required to review annually the relative payment weights of [off-campus provider department] services and their adjustments based on changes in cost data, medical practices and technology, and other relevant information.”
United States Court of Appeals for the District of Columbia Ruling
The Court of Appeals, however, reversed that decision, concluding that following the Chevron precedent and rule means that HHS’s reduction in reimbursement for E&M services provided by off-campus provider-based departments qualifies as a “method for controlling unnecessary increases in the volume of covered [outpatient] services” and was not “unambiguously forbid[den]” by Congress. Therefore, because the challenged rate cut is a method described under subparagraph (2)(F) of the OPPS statute, judicial review of that action is precluded. Neither the Appeals Court, nor the district court has jurisdiction over the challenge presented by AHA.
What Does This Mean?
Unfortunately, as noted by the National Law Review, this decision will likely result in the unpredictability of “OPPS as a payment system governed by steadfast rules mandated by Congress, going forward” and that “CMS is likely to devise increasingly aggressive interpretations of the provisions at issue here,” further putting the service and payment delivery systems at risk.