Federal judge rules CMS exceeded authority in hospital clinic cuts

September 19, 2019

A federal judge ruled in favor of the American Hospital Association (AHA) and hospital organizations, including Olympic Medical Center, saying that the Centers for Medicare & Medicaid Services (CMS) exceeded its statutory authority when it reduced payments for hospital outpatient clinics grandfathered under the Bipartisan Budget Act of 2015.

The ruling affects a CMS rule that, beginning Jan. 1, 2019, reduced payment to grandfathered off-campus hospital clinics by 30 percent, to 70 percent of the regular outpatient payment rate. Under CMS’s proposed 2020 outpatient proposed rule, clinic services would be reduced by an additional 30 percent, to 40 percent of the regular outpatient rate. WSHA earlier estimated the change will cut payments to Washington hospitals for services to Medicare enrollees by an estimated $15 million for 2019, $30 million or more for 2020 and each succeeding year, and about $424 million over a 10-year period. These cuts would have devastated many of our members’ abilities to expand vital primary care and clinic services to their communities.

The American Hospital Association and hospitals, including Olympic Medical Center, challenged the cuts in court on the basis that Congress did not authorize CMS to apply site-neutral cuts to grandfathered clinics, only new facilities opened after November 2015.

I am especially proud of Olympic Medical Center, under the leadership of its CEO and WSHA Board Chair Eric Lewis, for advocating on behalf of Washington State hospitals and the entire health care community. This is an exceptional success in ensuring that hospitals have the support needed to continue to meet the evolving health care needs of their communities.

It is unclear how quickly the court decision will affect cuts occurring under the existing policy. The court vacated the rule and referred the decision back to CMS to determine remedies. The parties will be required to submit a joint status report by Oct. 1, 2019, to determine if additional briefing on remedies is required. As soon as further information is available, we will communicate it to you, our members. In the meantime, I am happy to celebrate this step in the right direction.


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