COURT OF APPEALS UPHOLDS MEDICARE'S SITE OF SERVICE PAYMENT POLICY

The United States Court of Appeals for the District of Columbia has upheld the Department of Health and Human Services rule pursuant to which Medicare pays the same amount for evaluation ad management (E&M) services performed at hospital off-campus locations as it does for those services when performed at physicians’ offices.

Medicare has historically reimbursed E&M services at the generally higher Outpatient Prospective Payment System (OPPS) rate rather than at the physician fee schedule rate when performed in an off-campus hospital department because these departments are considered part of the hospital. In a rule that became effective in 2019, Medicare reduced E&M rates performed at off-campus hospital locations to the rates paid at physicians’ offices. The American Hospital Association and some individual hospitals challenged the rule. The District Court for the District of Columbia ruled in favor of the hospitals, finding that the rule exceeded HHS’ statutory authority. In a decision issued on July 17, 2020, the Court of Appeals reversed.

In reaching its decision, the Court of Appeals undertook a statutory analysis under the framework established by the Supreme Court in Chevron v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). Under this analysis, the key question became “whether HHS may reduce the OPPS reimbursement for a specific service, and may implement that cut in a non-budget-neutral manner, as a ‘method for controlling unnecessary increases in the volume of’ the service.’” The Court of Appeals held that HHS acted within its statutory authority stating:

It is reasonable to think that Congress, which cared enough about unnecessary volume to instruct the agency to ‘develop a method for controlling’ it, would have wanted the agency to avoid causing unnecessary volume growth its own reimbursement practices.’ We thus defer to the agency’s conclusion….

Moreover, because it concluded that the rule was within HHS’ statutory authority, the Court concluded that judicial review of the rule was precluded by the OPPS statute, meaning that neither the District Court or the Court of Appeals had jurisdiction over the hospitals’ challenge to the rule.

The case is American Hospital Assn, et al., v. Azar, Case No. 1:18-cv-02841. A copy of the opinion is linked here.